On the 19th April 2018 at Maple Accountancy Group we hosted our Landlords Breakfast Briefing. Topics covered during the session: • Future Tax Relief on Loan Interest • Essential information on changes to Capital Gains Tax • Additional changes you need to plan for In the presentation you’ll see summary overviews of how tax changes will affect Landlords in the coming years. If you would like to understand more about how the changes affect you, please get in touch: https://www.maple.uk.com/contacts/

1. Maple Landlords Seminar
Landlords Tax Update 2018

2. Sara Priestley
Maple Wealth Management
Sara.Priestley@sjpp.co.uk
01332 207336
www.maplewm.co.uk

3. Buy to let property – Interest relief
changes
Prior to 2017/18, individuals deducted loan interest from rental income and received
the appropriate amount of tax relief.
2017/18 full relief available on 75% of the interest and Basic Rate (BR) only on 25%.
2018/19 full relief available on 50% of the interest and BR only on 50%.
2019/20 full relief available on 25% of the interest and BR only on 75%.
2020/21 relief at BR only.
BR relief is given as a tax reducer.

4. Example 1 – Based on income from 16/17 Tax Year, Higher Rate Tax Payer
16/17 17/18 20/21
Gross Rents £15,635 £15,635 £15,635
Repairs & Other Tax Deductibles Costs (£6,960) (£6,960) (£6,960)
Interest On Mortgage (£8,610) (£6,458)
Net Rental Profit £65 £2,218 £8,675
Tax At 40% £26 £887 £3,470
Less Interest Relief (£431) (£1,722)
Net Tax Liability On Rental Income £26 £457 £1,748
Tax Increase £431 £1,722
Effective Rate On ‘Real’ Rental Profit (£65) 40% 702% 2,689% ⚠️
Tax Year
By 2020, the personal allowance is estimated to be £12,500 and the basic rate band £37,500

5. Further issues on interest relief
Relief at 20% is available on the lower of:
The interest paid not allowable as a deduction.
The property income for the year (less brought forward losses).
The adjusted net income.
Where full relief is not available, the amount of interest unrelieved is carried
forward to the following tax year and added to the ‘below the line’ deduction
of interest.

6. Example 2
Salary £24,000
Rent £2,800
Less: 75% x £3,600 (£2,700 £100
£24,100
Less: Personal Allowance (£11,500)
Taxable Income £12,600
Tax: £12,600 x 20% £2,520
Less: Reduction for interest
1. 25% x £3,600 £900
2. Rental Profit £100
3. Adjusted Income £12,600
Therefore £100 x 20% (£20)
Carried forward to 2018/19 (£900 - £100) = £800
• Bob has a salary of
£24,000 and lets out a
residential property
which as a result of
major repair costs
generates rental income
after expenses, but
before interest of
£2,800.
• He pays interest of
£3,600 in relation to
these properties.
Here is his 2017/18
position

7. Personal Company
Rental Income £16,000 £16,000
Interest (£2,000) (£4,000)
£14,000 £12,000
Corporation Tax (19%) (£2,280)
£9,720
Income Tax (20%) £2,800
Loan interest relief - (£2,000 x 20%) (£400)
£2,400
Dividends £2,000 x 0% -
Dividends £7,720 x 7.5% £579
Net Income Personal (£16,000 - £4,000 - £2,400) £9,600
Net Income Company (£9,720 - £579) £9,141
Personal v Company 1 :
Basic Rate Client
Rental Profit
£16,000
Interest
£4,000
2018/19
Basic Rate Taxpayer

8. Personal Company
Rental Income £16,000 £16,000
Interest £2,000 £4,000
£14,000 £12,000
Corporation Tax (19%) (£2,280)
£9,720
Income Tax (40%) £5,600
Loan interest relief - (£2,000 x 20%) (£400)
£5,200
Dividends £2,000 x 0% -
Dividends £7,720 x 7.5% £2,509
Net Income Personal (£16,000 - £2,000 - £5,200) £6,800
Net Income Company (£9,720 - £2,509) £7,211
Personal v Company 1 :
Higher Rate Client
Rental Profit
£16,000
Interest
£4,000
2018/19
Higher Taxpayer

9. Capital Gains Tax and let properties
Up to 15/16:
Gains that fell into the basic rate band 18%
Above the basic rate band 28%
From 16/17 onwards:
Residential properties (not commercial) – basic rate band 18%
Residential properties (not commercial) – above the basic rate band 28%
Other gains that fall into the basic rate band 10%
Other gains above the basic rate band 20%

10. Capital Gains Tax and let properties
Indexation allowance was frozen in April 1998 and abolished in April 2008. For
a property purchased in March 1982, the base cost was more than doubled in
April 1998!
Taper relief was introduced in April 1998 and abolished in April 2008. This
could reduce a taxable gain by 40%.
Up to 2007/08, gains were taxed at the top slice of income (10&, 20% or 40%).

11. Capital Gains Tax savings tips
Inter spouse transfer prior to sale ( 2 x annual exemptions of £11,700). Be wary of
SDLT though!
All legal costs on purchase and sale.
Any capital improvements (receipts, photographs, etc).
Live there!
Gift aid payments.
Personal pension contributions.

12. Payment of CGT on let properties
From 6 April 2020, HMRC propose that Capital Gains tax due on the sale of a
residential property will be payable with 30 days of sale.
If a property was sold 30th April 2018, Capital Gains Tax payable 31st January
2020 (641 days).
If a property was sold 30th April 2020, Capital Gains Tax payable 30th May 2020
(30 days).

13. Other property changes
£1,000 rental allowance from 2017/18 onwards.
If income (not profit) is less than £1,000 then no tax due.
If income more than £1,000 then either use £1,000 as an expense or actual
costs.
Not available if income from employer, partnership, close company where
individual is a shareholder
Replacement of Domestic Items Relief
For furnished accommodation but not furnished holiday lettings.
For replacement not original purchases.
Includes baths, washbasins, toilets, boilers and fitted kitchen units.

14. Making Tax Digital (MTD)
Quarterly reporting from April 2019 for VAT registered businesses.
Five returns a year in addition to a self-assessment tax return.
From April 2020 for other businesses (including landlords).
Turnover from 2020 could be as low as £10,000.

15. For Further Information or Support
Andy Hagues
✉️Andy.Hagues@MapleAC.Uk
Sean Hagues
✉️ Sean.Hagues@MapleAC.Uk
Telephone number:
📞 01332 207336
Website
🌎 maple.uk.com

16. Maple Landlords Seminar
Numbers created for illustration purposes only.
Calculations are based on estimations at time of creation
© Maple Accountancy Group Limited