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Summer budget rental income tax changes

Summer Budget 2015 Rental Income Tax Changes

In yesterday’s summer budget there were three significant tax changes announced that will affect future rental income:

1) The tax relief on mortgage interest will be reduced.

At present you can receive full tax relief for mortgage interest against a rental property, whether you are a basic rate or higher rate taxpayer.

From 6th April 2017 this is planned to be reduced, until from 6th April 2020 when there will only be basic rate tax relief available. If you are a basic rate taxpayer then there is no change for you*, this will only affect those who pay higher rate tax.

The change is to be phased in over four years:

2017/18 – 75% full relief, 25% basic rate relief

2018/19 – 50% full relief, 50% basic rate relief

2019/20 – 25% full relief, 75% basic rate relief

2020/21 – 100% basic rate relief

* One wrinkle to watch out for is due to the way the new relief will operate as a tax credit. In the tax calculation the loan interest is initially disallowed, before being granted as a tax credit at the end. This could mean that someone becomes a higher rate taxpayer as a result, losing some relief because of this.

2) The wear and tear deduction for furnished properties is to end.

At the moment landlords can claim a deduction in the rental accounts to cover wear and tear, which is calculated as 10% of rental income.

From 6th April 2016 this is to cease, and be replaced with a new relief that allows the costs for actual replacement of furnishings. There will be a technical consultation on this new relief published in due course.

3) The allowable limit for rent a room income is to be increased.

At present, you are allowed to earn rental income for letting a room or rooms in your own home of up to £4,250 tax-free.

This limit has remained the same for many years, but from 6th April 2016 the limit is to be increased to £7,500

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Accountant in Surrey

Are you looking for a personal tax specialist?

I built up my tax experience in industry and practice over 17 years before founding my own practice in 2006.

Based in Cobham, Surrey I can also help clients throughout the UK.

  

My goal is to make personal tax and accounts for the self-employed as easy as possible for clients

 

Award-winning Accountant

Small Business Saturday is the UK's most successful small business campaign. Only one hundred of the UK’s top small businesses are selected each year for the SBS100. They act as trail-blazers in the official count-down towards the annual event.

I was one of the alumni from the 2014 Small Business Saturday 100, resulting in two visits to Downing Street.

In the Surrey Digital Awards from 2015 - 2018, I was also the winner of several top awards.

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