Happy New Tax Year!Make Text Bigger
For those property rental business owners we have helped to restructure over recent months and years, they will know exactly what we mean when we say “Happy New Tax Year!”
For others, those who have buried their heads in the sand or failed to seek advice and/or take action, this article is to serve as a reminder of what 6th April 2020 means.
As of this date, private landlords can no longer offset ANY of their finance costs against rental income. In other words; money you have spent on mortgage interest, arrangement fees, overdraft interest, overdraft fees or any other finance costs for that matter will be regarded as taxable income. These additional taxable profits will be added together will all other forms of taxable income to work out the rate of tax you will pay.
Even if you make no other taxable income at all, but your finance costs are greater than £50,000, you will be a higher rate tax-payer.
In most cases there are solutions to this problem, but only if you take action!
Also remember; the tax bill you paid in January 2020 was a balancing payment for the tax due when only 50% of finance costs were disallowed, i.e. couldn’t be offset against rental income. The problem became twice as big as that on 6th April 2020.