Here at Crawfords we have been advising clients on property taxation for both commercial and residential property together with property developers since the 1950s.
In 2016 HMRC announced a restriction on tax relief on residential “buy to let” property loan interest.
Because of our experience we were able to start warning our residential “buy to let” landlord clients of the full impact of this change only shortly after the announcements were made. This has provided our clients with up to two years to prepare for the additional tax that will arise or to put measures in place to mitigate the impact.
Who is impacted by the restriction of tax relief on loan interest, and how?
Whether a “buy to let” landlord owns only a few properties intended to supplement his main income source and ultimately as part of his retirement fund or invests in many properties, the tax implications vary significantly. At best, this change will have no impact whatsoever for some “buy to let” residential property investors however for others the impact could be significant but will vary including:
a Making a basic rate taxpayer a higher rate taxpayer with the resulting loss of 20% tax relief on loan interest and loss of 50% of the special personal allowance known as the savings allowance.
b Loss of child benefit
c Loss of personal allowances
d A restriction in allowable pension contributions
Because of the above the impact of the restriction on loan interest is far greater than just the 20% that many people anticipate.
Many “buy to let” investors will have just felt the initial impact of the restriction on loan interest relief because although the changes were announced in 2016, the first time the tax payments will have been affected is January 2019. The impact will increase over the next three years for almost everybody even those who have not been affected in this first year could be affected in the future. Crawfords have already assisted many of our clients in minimising or removing altogether the impact of these changes. Although we are a long way through the second of the four transitional years over which this is being introduced it is not too late for those who have not yet taken any action.
How can Crawfords Accountants help?
Although the impact of the introduction of the loan interest tax relief restriction should be given immediate attention there are 9 different forms of tax that property investors must consider. These include income tax, corporation tax, capital gains tax and inheritance tax. Crawfords’ team of specialist accountants and property tax advisers has the knowledge and experience to ensure that all of these are taken into account when looking at any restructuring due to the loan interest tax relief restriction. However, even if you do not need to take any action in that respect we can assist in reviewing your current portfolio and structure and advising you in the short, medium and long term on all aspects that should be considered.
If you think you need any advice on any property related accounting and tax matters whatever the nature and size of your property interests or investments, do not hesitate to contact Daniel Prais in our office for a free initial consultation.