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One in six landlords unaware of mortgage tax relief phase-out - claim

A survey conducted for a mortgage broker suggests one in six landlords is unaware that 2019-2020 - tax assessments for which are due this month - is the last time they can deduct mortgage expenses from rental income.

Since April 2017 the amount of mortgage interest payments landlords have been able to deduct as an expense has been gradually phased out.  

From April 2020 landlords were no longer able to deduct any mortgage expenses from rental income. Instead, landlords will receive only a tax-credit, based on 20 per cent of their mortgage interest payments.

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Over 40 per cent of landlords responding to the survey were also unaware of the changes in Capital Gains Tax made last year. 

Since April 6, 2020 there have been changes to how landlords need to declare and pay Capital Gains Tax. Anyone who disposes of a UK residential property that is not their main home and make a capital gain where there is tax to pay, now need to inform HMRC and pay the tax due within 30 days of completion.

More than a third of landlords still thought they could put off declaring and paying Capital Gains Tax until their next tax return. One in 10 thought they had six months within which to settle. 

And one in eight confessed to having filled in their tax return late in a previous year.  HMRC has included Coronavirus-related reasons as an explanation for missing the January 31 deadline. However, this could only be part of an appeal against the £100 fine for filing a self-assessment tax return late and it is not clear as to what would constitute a Coronavirus-related reason.

Almost two thirds of landlords surveyed said that recent changes in taxation generally had made them consider buying any future buy to let properties through a limited company, while nine out of 10 landlords were fearful that higher taxes were on the horizon for landlords as the government sought to recoup the money paid out because of the Coronavirus crisis.  

 

 

The survey was conducted for Property Master and its chief executive, Angus Stewart, says: “Landlords have been subject to numerous tax and regulatory changes over recent years but the change to the treatment of mortgage interest payments is by far the most damaging. It is worrying to say the least that there are many landlords unprepared for that fact that that they can no longer deduct any of their mortgage interest payments going forward.”   

“We know that this change has already encouraged a proportion of smaller landlords to leave the sector. We expect to see others follow judging from the comments made by some of the landlords completing our survey. As well as the obvious impact the removal of this tax relief will have, another lesser appreciated effect is that it will push some landlords into the higher tax bracket by including as income money they have actually paid out in interest payments.”

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    Currently this does not include basic rate tax payers. So the key is to either invest via a company or make sure that you remail a basic rate tax payer, which lets face it is still a comfortable income.

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    Agree just keep your tax code down

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