residency and domicile

Residential Buy-to-Let Landlords

In his 2015 Budget, the Chancellor of the Exchequer announced changes affecting residential landlords who are active in the buy-to-let sector. Many of the tax measures that were announced have been implemented in April 2016, with the remainder being phased in over the coming years. The motivation behind the tax changes applicable to landlords of UK residential buy-to-let property has been widely reported as an attempt by both the government and the Bank of England to cool the property market in London and the South East of England.

Private buy-to-let landlords have previously benefited from a number of tax breaks to improve their return on investment. The most beneficial tax break being full relief on mortgage/loan interest. The rules around mortgage interest relief have been changed with the new rules being phased in over four years with effect from 6 April 2017.  In most cases, this will have the effect of higher income tax becoming due and in some instances could make the landlord’s property business unprofitable, particularly if they are highly mortgaged.

The wear and tear allowance, where a landlord would automatically be entitled to deduct 10% from rental income for wear and tear without proof of purchase on furnished lettings, is now replaced with replacement furniture relief.

Stamp Duty Land Tax on the purchase of additional residential properties will attract an additional 3% SDLT for each band on the entire value of the property.  If the main residence is being replaced, no additional SDLT would be due.

Although Capital Gains Tax on the disposal of most assets has been reduced, it remains unchanged for residential properties, with any gain on disposal continuing to be taxed at 28% and 18%. This applies to all owners of residential property regardless of their tax status.

Please download our Guide, which provides more detailed analysis of the changes implemented and the impact on buy-to-let landlords, together with recommendations on options available.

Download a PDF of the full resource