Sunset on Buy to let?
The small change
Currently people letting out furnished residential property are able to claim 10% of their rental income as an allowance to allow for the cost of the upkeep and replacement of those furnishings. From April 2016, they won’t. They will instead be able to claim for the actual cost of any replacements.
The impact for the taxpayer therefore is that records must be kept of this expenditure, where none were previously required, and the amount deducted from rent may go up or down compared to the current system.
But more urgently, where expenditure is planned for the months between now and April 2016, it will be sensible to consider postponing these purchases. This is because money spent now will be ignored, and 10% will be claimable anyway. Spending the same money after the 5th April will save tax in a year where otherwise there may be no deductions for furnishings. So, where practical, if a suite is due an upgrade, we’d suggest you wait until 6th April if your tenants will bear it.
If you’d like to see the impact of these changes for your property portfolio, please contact us now.
The big change
See our next post for a second, and potentially much more punishing change to the taxation of residential property income.
Please note: JSA are not authorised to provide investment advice. The notes above are discussion of the expected tax impact of changes announced by Government. If you require investment or more general financial planning advice, you should speak to an Independent Financial Advisor. JSA work in partnership with Charles Cameron Financial Planning LLP, who are able to give this type of advice. Please mention us if you speak to them.