Changes announced in the 2015 Summer Budget will significantly increase tax bills for the two million buy-to-let landlords in Britain. The chancellor, George Osbourne, slashed tax relief for property investors.
From April 2016 landlords will no longer be able to automatically deduct 10% for wear and tear. At the moment landlords providing furnished property can deduct 10% of their rent for wear and tear irrespective of their expenditure. From April there will be a new "replacement furniture relief" which will mean landlords will only be able to claim for costs they actually incur however it will apply to all residential properties even if it they are not furnished. The relief will not apply to furnished holiday lettings or commercial property.
We will see the beginning of the end to the higher rate of mortgage interest relief on residential property. Landlords will no longer be able to claim tax reliefs worth 40% or 45% of the interest payments on their buy-to-let mortgages. By 2020 this will be restricted to 20% and will be phased in over a four-year period so it is going to be vital all landlords keep accurate records and know what they can claim for.
What costs can be claimed against income tax on property rental profits?
We’ve put together a helpful Guide to Tax Deductible Letting Expenses for Landlords that has been featured on the Landlord Zone website. The information may be subject to change and you are advised to consult a tax specialist before making any decisions.