Buy to let landlord property taxes

A number of less favourable tax changes relating to buy-to-let properties came into force on 6 April 2016.

  • Stamp duty on buying secondary properties – any property worth more than £40,000, other than your main home, now attracts a stamp duty surcharge of 3 per cent
  • Income-tax relief on mortgage interest cut –Previously, tax relief on mortgage interest for buy-to-let properties was the same rate as a landlord’s marginal rate of income tax (up to 45 per cent), but this is now only allowable at 20 per cent. This means there is no change for basic-rate taxpayers, but represents a big increase in income tax for higher-rate taxpayers, depending on the amount of borrowing they have.
  • Income-tax charged on buy-to-let turnover not income –although this change has not made headlines, nonetheless it is a potentially expensive variation for buy-to-let landlords.
  • Capital gains tax rates unchanged for property – whereas all other investments now attract a lower rate of capital gains tax (CGT) upon selling the investment, having fallen from 18 per cent at the basic rate of CGT to just 10 per cent, the CGT rate remains unchanged for property investments

It is important to understand that these tax changes do not apply to your primary home, but to any secondary property, including buy-to-let investments and holiday homes.

The changes have also affected parents, who may previously have put their own names on a second mortgage, in a bid to help their children onto the property ladder. The new rules, mean that this too would constitute owning a second property and would attract 3 per cent stamp duty.

There are of course a number of ways to reduce the property tax burden, so before you buy seek advice from our tax experts, who will help you choose the most cost effective property purchase route.

Contact us now to find out how our experts can help you.

An Introduction to Tax for Residential Landlords