Tax changes for 2018/2019
While there haven’t been any recent tax announcements that could affect landlords, there are some changes taking effect this tax year that you should be aware of.
Increase in the personal allowance
The personal allowance has increased for this tax year by £350 - from £11,500 to £11,850 - and the earnings threshold for a zero personal allowance has increased from £123,000 to £123,700. (If you earn between £100,000 and £123,700, the personal allowance decreases by £1 for every £2 you earn and if your income is above £123,700, you don’t get any personal allowance at all.)
New tax bands for Scotland
The Scottish Government has introduced new bands for the coming tax year. There are now five different bands – starter, basic, intermediate, higher and top rates – which not only makes it much more complicated for residents to calculate what they’ll be liable to pay, but also means that those earning more than £33,000 a year will pay more tax than those earning the same amount south of the border. While there is only £70 difference for people on £33,000, if you’re earning £200,000, you’ll pay £2,442.50 more tax in Scotland.
New stamp duty bands for Wales
From April 2018, there are new tax bands for anyone buying in Wales. The UK Stamp Duty Land Tax (SDLT) will now become the Land Transaction Tax (LTT).
As in England if you are buying a second property you will pay an additional 3% LTT.
Increase in capital gains exemption amount
If you’re planning to see an investment property this year, you’ll be pleased to know that the annual amount of gains you can receive tax free has risen from £11,300 in 2017/18 to £11,700 for 2018/19. Above that amount, your profits will be liable to capital gains tax at 18% in the standard tax band and 28% in the higher-rate band.
Second phase of withdrawal of mortgage interest as an ‘allowable expense’
Your 2017/18 tax return, due for paper filing by 31st October, is the first to reflect the phasing out of mortgage interest as an ‘allowable expense’, being replaced by a reduction in tax liability. While it won’t make much difference to most basic-rate tax payers, it may push you into a higher bracket and if you’re in the 40% or 45% band and have a high LTV, you could see a drop in profits over the next few years.
For the 2018/19 year, 50% of the mortgage interest amount can be deducted from your rental income, with the remaining 50% subject to tax relief at the basic rate of 20%.
And, finally, this year’s tax deadlines this year for your diary:
For your 2016/17 tax return:
30th April 2018 Last day on which you can file your return to avoid paying a £10 per day penalty
31st July 2018 Second payment on account for 2017/18
For your 2017/18 return:
5th October 2018 Register online for Self Assessment, if you haven’t already
31st October 2018 Paper tax return filing.
If you have any questions or would like to speak to a buy-to-let mortgage adviser, please feel free to give us a call or use our contact form.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.