- Home » Expat News » Expat buy to let landlords to face increased tax bills this year
Expat buy to let landlords to face increased tax bills this year
| Published: | 10 Apr at 6 PM |
Want to get involved?
Become a Featured Expat and take our interview.
Become a Local Expert and contribute articles.
Get in touch today!
Become a Local Expert and contribute articles.
Get in touch today!
This month's start of the current tax year sees unwelcome changes in tax relief and profit calculations for UK expat buy-to-let landlords.
Expat property investors are now being hit by the same changes as UK resident landlords, beginning with the controversial ending of mortgage interest tax relief in spite of several attempts to have the new rule reversed. This is the major change, fought against unsuccessfully right up to the High Court on the premise that it would infinge landlords' human rights. In addition, the manner in which profits are calculated has also changed, catching many more landlords in the tax net.
The scrapping of tax relief on mortgage interest will hurt the pockets of landlords paying income tax at 40 per cent or more, with the new rule including expat landlords in the Non-Resident Landlord Scheme. From now, landlords receiving tax relief on their mortgage interest payments at the marginal rate will have the claimable amount reduced annually during the next four years. Those who claimed 40 per cent relief in the tax year just ended will only get 35 per cent relief in the current tax year, followed by 30 per cent next year, 25 per cent in 2019 and 20 per cent in 2020.
The new rules as regards property profits may well see landlords paying the basic rate of tax at 20 per cent suddenly finding themselves in a higher tax bracket. More changes may be in the pipeline due to ongoing consultations on the Revenue’s conditionality proposal, which involves the identification of businesses including buy-to-let landlords who are not paying tax on their profits. The basis of conditionality is that, should a business need local authority permission to trade, registration with the tax authority must be proven as part of the licensing procedure.
Property letting is in HMRC’s headlights this year, as the new cash cow for increasing government revenues and exposing the hidden economy. In addition to landlords, other business under threat of forced tax registration linked to licenses are those providing private hire vehicles, trading, scrap metal dealers, environmental health and planning. These and other similar cash-heavy businesses are about to be highlighted by HMRC along with self-employed business owners, subcontractors and others who self-report for tax purposes.
Source: Money International
Expat property investors are now being hit by the same changes as UK resident landlords, beginning with the controversial ending of mortgage interest tax relief in spite of several attempts to have the new rule reversed. This is the major change, fought against unsuccessfully right up to the High Court on the premise that it would infinge landlords' human rights. In addition, the manner in which profits are calculated has also changed, catching many more landlords in the tax net.
The scrapping of tax relief on mortgage interest will hurt the pockets of landlords paying income tax at 40 per cent or more, with the new rule including expat landlords in the Non-Resident Landlord Scheme. From now, landlords receiving tax relief on their mortgage interest payments at the marginal rate will have the claimable amount reduced annually during the next four years. Those who claimed 40 per cent relief in the tax year just ended will only get 35 per cent relief in the current tax year, followed by 30 per cent next year, 25 per cent in 2019 and 20 per cent in 2020.
The new rules as regards property profits may well see landlords paying the basic rate of tax at 20 per cent suddenly finding themselves in a higher tax bracket. More changes may be in the pipeline due to ongoing consultations on the Revenue’s conditionality proposal, which involves the identification of businesses including buy-to-let landlords who are not paying tax on their profits. The basis of conditionality is that, should a business need local authority permission to trade, registration with the tax authority must be proven as part of the licensing procedure.
Property letting is in HMRC’s headlights this year, as the new cash cow for increasing government revenues and exposing the hidden economy. In addition to landlords, other business under threat of forced tax registration linked to licenses are those providing private hire vehicles, trading, scrap metal dealers, environmental health and planning. These and other similar cash-heavy businesses are about to be highlighted by HMRC along with self-employed business owners, subcontractors and others who self-report for tax purposes.
Source: Money International
Comments » No published comments just yet for this article...
Feel free to have your say on this item. Go on... be the first!
