Kirkpatrick & Hopes - Succession Planning Accountants

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CHANGES TAX ON RENTS

Changes

Assume £250k @ 5% say income rents of £12,500

75% LTV loan of £187,500x 4% = £7,500

SDLT extra 3% cost £7,500

Let furnished no wear and tear allowance 10% = £1,250 extra tax of £250 for basic rate and £500 for higher rate taxpayer

Reduction of interest relief 2017-18 £1875 x 20% = £375

2018-19 £3750 x 20% = £750

2019-20 £5625 x 20% = £1125

2020-21 £7500 x 20% = £1,500

Means in Tax bills

2014/15 £12,500 – £1250-£7500 = £3750 X 40% = £1500

2015/16 £12,500 – £1250-£7500 = £3750 X 40% = £1500

2016/17 £12,500 – £7,500 = £5,000 X 40% = £2,000

2017/18 £2,000 + £375 = £2,375

2018/19 £2,750

2019/20 £3,125

2020/21 £3,500

Need to make quarterly returns to HMRC from April 2018? Probably

 

Implications on Buy to lets

  1. Investment income – not subject to National insurance but subject to income tax

 

  1. Depends on other income – reduce tax on other sources pension contributions, ISA’s EIS and VCT’s

 

 

  1. Tax based on profit per property (rent less allowable expenses)

 

  1. Share income? Have property owned in joint names? Watch Stamp Duty if transferring inter spouse if

 

 

  1. Notify HMRC when you start letting and register for self assessment need to file annual tax returns and possibly quarterly returns as well from 2018 making tax digital

 

  1. When selling subject to Capital Gains tax

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