A New Tax Year and New Challenges
Despite all the turmoil happening around us, it remains important for landlords to focus on the fundamentals. Whether this be mortgage payment holidays, protecting their investments, supporting tenants where possible or impending tax changes. And it’s vital for landlords to remember that new rules have come into force at the start of the new tax year.
So here is a brief reminder of what you need to be aware of:
Mortgage interest tax relief changes
From 2020-21, landlords will only be able to offset 20% of their mortgage interest payments when filing their tax returns.
Capital gains tax
The 2020–21 tax year also brings a significant change to how capital gains tax (CGT) is paid. Landlords must now declare and pay any CGT liabilities using the government’s new online service within 30 days of selling the property.
Reduction of capital gains tax relief
The government is also tweaking the rules around private residence relief and letting relief on CGT bills. These two deductibles are only available to landlords who once lived in the investment property themselves, so they won’t necessarily apply to a large proportion of buy-to-let landlords.
Private residence relief
For landlords who once lived in their investment property, they wouldn’t need to pay CGT for the years they lived there when they come to sell. Under the current rules, they’ll also be exempt from CGT for the final 18 months they owned the property, even if they didn’t live there themselves. However, from the 2020–21 tax year, the 18-month period will be cut to nine months.
This change effectively removes letting relief as a deductible for the vast majority of landlords when filing their CGT returns.
With so many things on all our minds it’s sometimes easy to forget some of the fundamentals. So, I hope this recap will help ensure that landlords can get a better handle on these upcoming changes and remember, if there is anything we can do to help you through these challenging times then please contact us on 0800 170 1888.