Over the past few weeks I have been spending a lot of time discussing the restriction on the allowable finance costs for buy to let landlords from 6th April 2017.
These changes don’t just affect current higher taxpayers, the restriction of finance costs against property income actually pushes a lot of basic rate landlords into the higher rate tax band.
A typical example could be a buy to let investor that earns £35,000 per annum, with three properties in his portfolio, using the figures below the profit of the property portfolio is £3,570, with tax payable of £714.00. Even though the actual profit on the property portfolio won’t change over the next 4 tax years, by 2020/21 due to the restriction of finance costs the tax payable will be £3,728 per annum.
There are a lot of landlords who are basic rate tax payers, with a highly geared portfolio that aren’t taking advice on these changes, and the potential tax planning opportunities. As with everything the devil is in the detail, and if they have not read the detail they will unaware on how these changes will impact them.