As a result of the changes to available tax relief, landlords have seen the relief for finance costs on residential properties reduced over the past few years before it was fully phased out in April of 2020.
If you own a property portfolio, you will likely experience increased challenges because of recent government changes to property taxes.
In 2016, investors saw the removal of the 10% wear and tear allowance for residential properties, as well as an extra 3% stamp duty land tax applicable to landlords who already own property for subsequent buy-to-let property purchases.
While the new tax credit rules haven’t changed much for basic rate taxpayers, anyone in the higher tax bracket will find themselves more impacted. Mortgage interest can’t be offset as was the case in the past, and you will usually find that you are paying significantly more tax on any income derived from your rentals. The changes affect landlords who own property in their own name, rather than landlords who own property through a corporate structure. As a result, many landlords are considering setting up corporate structures to own property, rather than opting for private ownership
It’s important to understand your property portfolio financing options. Both owning property in your own name or owning property through a company have benefits and potential pitfalls. What will be best for you will likely depend on your experience, the size of your portfolio and your personal preferences. Understanding what choices you have and making a decision based on your own circumstances is essential.