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Buy to Let Landlords Under Fire!

Big changes are happening in the Tax world this April 2016 for Buy to Let Landlords. But there are some Tax Planning angles that can be considered, and acted upon before these changes kick in.

A summary of the main changes with relevant Action Points to consider are:

1. An additional Stamp Duty Land Tax (SDLT) rate of 3% will be applied on Buy To Let properties and second homes purchases above £40,000.

So, on a Buy To Let property bought for £115,000 there will now be SDLT payable of £3,450. Previously there would have been £NIL SDLT payable – Ouch!

The Planning is so obvious here that even Baldrick from the Black Adder comedy series can see this. –  Yes, accelerate the purchase and buy before the 1st April 2016 and save yourself a juicy £3,450!!!

2. The 10% Wear and Tear Allowance associated with fully furnished properties is to be abolished from 6th April 2016 and is replaced by actual replacement expenditure.

The Planning here is to delay spending on any replacement items in the furnished properties until after 6th April 2016. For example, if you were thinking of spending £4,000 on replacement items in a fully furnished property and were previously claiming the 10% Wear and Tear Allowance, then by delaying this spending until after 6th April 2016, what will you gain?

Well, quite a bit really.  If you are a Higher Rate Taxpayer you would save £1,600 in Tax and a Basic Rate Taxpayer would save £800, all for just delaying expenditure you were going to make in the first place!! – As my Father would say “ Well it’s better than a poke in the eye with a sharp stick” ( Where do these older folks get these sayings from???)

So what would this mean to a 40% Taxpayer looking to buy another Buy To Let property for £115,000 and thinking of replacing some furniture for £4,000 in a fully furnished property usually claiming the Wear and Tear Allowance?

The bottom line with this is by following the advice in this Blog, you will have saved a cool £5,050 in Tax!! – I am sure that with this Tax saving, you and the missus could splash out and follow Tony  Christie in the pop song “Is this the way to Amarillo”, or better still follow the 1975 pop hit from Typically Tropical “ Whoa! I’m going to Barbados” and have a damn good holiday on the Taxman!

3. There will be a restriction of the amount of Loan Interest relief that Buy to Let landlords can claim against their Profits and their Tax position, but not until 6th April 2017.

After 2017 it will basically mean that Landlords will pay more in Tax than in previous years even with identical Profits, and in some cases quite a lot more!

There are some Tax Planning angles to consider here and one of these is “Should a Landlord form a Limited Company?” As the Loan Interest relief restriction does not apply to Limited Companies. However, I do STRONGLY advise all Landlords to fully review and consider all of the consequences of operating through a Limited Company, particularly in view of the new ‘Dividend Tax’ to be brought in as from the 6th April 2016.

It is vital that a full and frank discussion takes place before any action is taken on this. As usual, the implications of all the possible Taxes need to be carefully considered, Income Tax, Corporation Tax, Capital Gains Tax, Inheritance Tax, VAT, and Stamp Duty (National Insurance may be the only one not to apply here?)

So, if anyone requires further help and advice on the impact of these new rules, then please contact me as I will be happy to assist. There are lots of Tax changes happening, but by taking a more pro-active approach to Tax Planning, you can keep more of what you earn!




Rickey Cooper FFA , FMAAT, ATT

JCL – Jones Cooper Limited



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