This week we had an interesting meeting with Phillip Bryant from Acuity where we discussed the new landlord tax which came into force in April and the options available to Buy-to-let landlords. Here is an article from Phillip which we thought would make interesting reading.

Phillip writes:-
Landlords of residential properties have benefited from tax relief on finance charges, such as mortgage interest for many years. However, from April 2017 tax relief on mortgage costs is to be restricted and by April 2020 only the 20% basic rate of tax relief will be available.

The reduction in the relief for finance costs for landlords will be phased in over four years from April 2017 and is likely to be an expensive change for higher rate and additional rate taxpayers. This has been nicknamed the “Landlord tax” by the media.

Deductions from property income as currently allowed will be restricted to:
• 75% of finance costs for 2017-18 with the remaining 25% at the basic rate
• 50% of finance costs for 2018-19 with the remaining 50% at the basic rate
• 25% of finance costs for 2019-20 with the remaining 75% at the basic rate
• From 2020-21 all finance cost deductions will be restricted to the basic rate.

These changes will most affect buy-to-let investors who are highly geared. Let’s look at an example of an additional rate taxpayer with a £1m buy-to-let portfolio generating £50,000 gross rental income.

If for example, there is a £750,000 mortgage on the properties with interest of 4% the investor would currently get tax relief of £13,500 (£750k x 4% x 45%). By April 2020, the amount of tax relief will be reduced to £6,000 (£750k x 4% x 20%) resulting in a tax bill that is £7,500 higher. A £75,000 increased bill over a 10-year period.

These changes are significant and will mean that many taxpayers will need to look how to more effectively structure their property ownership.

This new tax law impacts over 205,000 landlords and is expected to put a £900 million a year dent in their finances. This is causing a lot of landlord’s consternation and concern and there has been a rush of enquiries in the race to find out what is the best way forward for them.

We have a solution that mitigates the above problem and I am pleased to say it is non-contentious and is also a path well-trodden by businesses for many years. We have been working with lots of concerned Landlords by helping them understand their options and offering sound advice and putting place proven solutions for them.

If you have more than 5 buy to let interest paying properties in your own name or you’re already a higher rate tax payer or you have high value, highly geared properties you probably need to speak to us now.

Withdrawal of the wear and tear allowance…
In addition, from April 2016, the ‘wear and tear allowance’, which allows landlords to reduce the tax that they pay (regardless of whether they replace furnishings in their property) will be replaced by a new system that only allows them to get tax relief when they replace furnishings.

We can already see that our services are being sought-after, especially when the effects of restrictions on finance cost relief begin to kick in. Given that such arrangements can take months to implement and that demand for advice is likely to intensify, I would recommend that action is taken sooner rather than later.

Free Consultation
We are offering a free consultation to help you work through the process and answer your questions and explain the fees and timelines.

If you would like to know more please call me Phillip Bryant on 07736735607 or email me on

Landlord Tax – by Phillip Bryant

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