Changes to Landlords tax relief and landlords tax credit

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    Changes to Landlords tax relief and landlords tax credit

    Good afternoon all,

    I've been getting to grips with the changes to landlord's tax relief over the last few years. One thing that worries me considerably is that since all rental income is now taxed, and I must pay my loan interest and repayments out of this also, that really doesn't leave much left.

    I see that there is a tax credit for 20% for landlords to replace the old relief. I've had a google and I can't seem to find out how one accesses/ applies for this credit. Can someone shed some light on how I might get this?

    Thanks very much,

    Cadence

    #2
    Previously loan interest was an allowable expense which could be deducted from the rental income.

    Now it is no longer an allowable expense so your rental surplus will be higher and you pay will have higher tax. bill.

    However you are allowed to claim 20% of the loan interest towards reducing your higher tax bill.

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      #3
      The only people negatively affected by the change in how the interest can be claimed are higher rate tax payers and standard rate tax payers who were close to the higher rate threshold.

      For most landlords, the change is simply in how the tax is calculated, the outcome is the same.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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        #4
        The 20% credit is automatically applied, you would have been getting it for the last 3 years!

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          #5
          Originally posted by cadence248 View Post
          I see that there is a tax credit for 20% for landlords to replace the old relief. I've had a google and I can't seem to find out how one accesses/ applies for this credit. Can someone shed some light on how I might get this?
          When you complete your tax return, you no longer deduct the interest (and any other finance related costs, e.g. a setup fee) you have paid as an allowable expense.
          You calculate the tax you would pay without that deduction (i.e. income less other expenses at the appropriate rate(s))
          Then you deduct 20% of the finance costs from the tax figure you've calculated.

          There were transitional arrangements in place until the end of the last tax year, so for a 2019/20 tax return 25% of the finance costs can be deducted from income and 75% of these costs are subject to the 20% deduction.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            Thank you very much everyone for explaining the mechanics of this to me. I really appreciate it.

            Comment

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