You will hopefully have completed your self-assessment tax return form for 2017…
In the current year (2018) the changes start in respect of restricting interest relief, 75% of your allowable finance costs will be deducted as an expense of the business and the remaining 25% will be treated as a tax reduction at 20%.
This is the first year of the change and will affect your taxable income level and thus may affect other items such as high-income child benefit charges as your taxable income will increase although your actual income will not. The full changes are being introduced over a four-year period.
The renewals basis ceased on 6th April 2013; wear and tear allowance ceased on 6th April 2016 so we’re now entering the second year of replacement of domestic items relief which relates to the replacement of items used solely by tenants and which are not for use in a commercial rental or a furnished holiday let (where capital allowances MAY still be available). Remember no relief for fixtures, nor initial purchase of furnishings and equipment.
The Making Tax Digital record keeping requirements for landlords have received a reprieve – but we don’t know how long for. The tax rules for record keeping by property rental business owners are the same as for self-employed individuals. A general requirement to “keep all such records as may be requisite for the purpose of enabling him/her to make and deliver a correct and complete return for the year or period” and to retain those records until the end of the fifth anniversary of 31 January next following the tax year. Therefore, year ended 5 April 2017 records must be retained until at least 31 January 2023.
You may consider selling the property you’ve been letting as you will be in negative cash flow as a result of the changes. Plan carefully as any gain will be taxable at 28%; from 2019 the payment date for CGT on the disposal of rental property is proposed to be 30 days after completion but hopefully this will not be implemented.
For any advice on this please do not hesitate to contact me.
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