Residential Landlords need to be aware of the changing rules with regards to the treatment of Interest on loans for Residential properties. As specialised Hackney accountants, we’ve gathered the following.
Up until 5 April 2016 Interest on loans for Residential properties could be offset against the Rental income of Residential properties in the same way as any other expense.
In 2016/2017 tax year the Government changed the rules for offsetting interest on Interest on loans for Residential properties against Income.
Gradually over the next 4 years the amount of the interest that can be offset will reduce by 25% a year.
The disallowed element in
2016/2017 will be 25%,
2017/2018 will be 50%
2018/2019 will be 75%
2019/2020 will be 100%
The disallowed element will be allowed to be offset against the tax liability as a tax reducer at a rate of 20%.
This will clearly affect people on 40% or more tax rates as well as pushing more people into the higher tax rates.
Furthermore, the higher taxable income could have implications if claiming benefits.
Need more information or looking to get help from your local hackney accountants? Get in touch with us and we’ll be glad to assist.