New tax rules for unencumbered property?

by Readers Question

11:13 AM, 6th February 2017
About 2 years ago

New tax rules for unencumbered property?

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New tax rules for unencumbered property?

My wife has a commercial property(convenience store) with 2 X 2 bedroom flats above. This complete unit is unencumbered by any mortgage. unencumbered

The 3 units are all rented out. Does the new tax rules being fazed in from this April affect all of these units or, is, as I think I might have read somewhere, the commercial shop unit not affected?

This property is held in her name only and not in a company.

If she was to transfer it into a company then she will have a serious capital gain of about £300k before any allowance as she’s held it for 16 years.

Many thanks

Paul



Comments

Neil Patterson

11:17 AM, 6th February 2017
About 2 years ago

Hi Paul,

The new Section 24 tax rules relate to the reduction in mortgage interest relief offset against income tax.

If the property is unencumbered and your earned income plus rental income does not push you into a high rate tax bracket then the new rules will have no effect on you.

Please see >> https://www.property118.com/budget-2015-landlords-reactions/76164/

And >> https://www.property118.com/tax/

Monty Bodkin

11:41 AM, 6th February 2017
About 2 years ago

Reply to the comment left by "Neil Patterson" at "06/02/2017 - 11:17":

"the new rules will have no effect on you."

So if neighbouring higher rate taxpayers are putting up rents, unencumbered landlords won't follow suit?
What lovely altruistic people landlords are!

Mark Alexander

13:15 PM, 6th February 2017
About 2 years ago

Based on what you have said the restrictions on finance cost relief will not affect you, save for raising rent in your area meaning that you can choose whether to be more competitive or simply charge more and make bigger profits.
.

Michael Barnes

21:46 PM, 9th February 2017
About 2 years ago

Reply to the comment left by "Neil Patterson" at "06/02/2017 - 11:17":

"If the property is unencumbered and your earned income plus rental income does not push you into a high rate tax bracket then the new rules will have no effect on you."

Why would the new rules have an effect if he/she is pushed into a higher tax bracket?
I believe that if unencumbered, then there is no effect.
Please explain

Mark Alexander

21:55 PM, 9th February 2017
About 2 years ago

Reply to the comment left by "Michael Barnes" at "09/02/2017 - 21:46":

The new rules would have no effect on an unencumbered property.
.

Michael Barnes

23:42 PM, 9th February 2017
About 2 years ago

A thought I just had: 'unencumbered' does not mean 'not claiming finance costs' (I have unencumbered properties but claim finance costs for loans secured on my home).

Therefore the answer to the question would appear to be "the commercial property is unaffected, but the residential properties may be affected, as per Neil's comment". However, I am not an expert, so consult someone knowledgeable, or ask HMRC.

Mark Alexander

6:45 AM, 10th February 2017
About 2 years ago

Reply to the comment left by "Michael Barnes" at "09/02/2017 - 23:42":

If the mortgage was raised against the security of the private dwelling house to purchase the BTL property then you are quite right, those finance costs may be claimed and could, therefore, be affected.
.

Jiten Shah

7:50 AM, 11th February 2017
About 2 years ago

Hi, the new tax changes commencing April 2017, will have no effect on you or your tax bill as they apply to interest relief


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