The new range of Government tax changes that have either been introduced already or are awaiting implementation could put landlords at risk of non-compliance in their accounting, warns Visionbase Software, a software house providing advanced property management solutions.
The Government tax changes include the forthcoming changes to mortgage interest tax relief, which will be gradually introduced from 6th April 2017.
Recent research shows that a third of buy-to-let landlords in the UK do not understand that their ability to offset mortgage interest payments against tax is being restricted by the Government.
A further one in ten say they are planning to exit the lettings market entirely as a result of this and other Government tax changes.
In 2015, the Government announced that the amount that landlords can deduct for mortgage interest and other finance costs will be reduced, meaning that, by 2020, only 20% of finance costs will be tax deductible.
The research also found that most landlords see this measure as detrimental to their businesses.
The Managing Director of Visionbase Software, Paul Oxley, says: “Most landlords will be looking at ways to minimise the tax changes to protect their profits. While the most obvious plan is to raise rents, other options open to landlords include transferring property ownership into a corporate structure, or to a partner who pays a lower income tax rate.
“All these new tax measures, combined with mounting legislation, are putting landlords under huge pressure. It can be overwhelming to keep up, and failure to do so can lead to fines and loss of licence.”
All landlords must be aware of the forthcoming Government tax changes, and how they will affect their lettings businesses and profits.
Remember to always seek expert financial advice when organising your taxes and accounts.
To ensure that your rental income is protected against tenant rent default, get an instant online quote for our essential Rent Guarantee Insurance here: https://www.justlandlords.co.uk/rentguaranteeinsurance