"Many are taking advantage of the current situation to re-evaluate their investments, in order to maximise opportunities as normality returns."
The guide, entitled 'UK Tax Relief on Finance Costs', informs intermediaries on the key considerations faced by their landlord clients and how they run their rental portfolios.
Prior to April 2017, landlords had been able to deduct 100% of their home finance costs from their rental income to calculate the taxable rental profit. These restrictions have been gradually phased in and from, tax year (2020/21), there is no allowable deduction for finance costs at all.
Some of the key highlights from the guide include:
• Why there’s been an increase in popularity around the use of limited company SPVs for buy-to-let ownership
Since the changes to taxation on privately owned buy to let properties, there has been a shift towards an increase in properties being purchased within a limited company SPV. There’s also been interest in moving properties from personal names into a limited company. The guide will help brokers understand the tax implications and the reasons why some landlords may want to move from personal ownership into a limited company structure.
• With the increasing popularity of limited company SPVs buying and holding buy-to-let property, why have intercompany loans become more common?
The guide explains in more detail, why some properties owners may want to set up a new limited company SPV with the shareholders remaining the same in both companies and an intercompany loan facilitated for the deposit.
• Why is it important to know about joint tenants vs tenants in common?
When buying or owning a property in personal names the value in seeking independent tax advice can be the difference between profit and loss. The guide outlines each tax that brokers need to be aware of prior to purchase, transfer into a company structure or selling an investment property. This includes the capital gains tax liabilities of incorporating and the implications of buying or transferring property for stamp duty land tax and inheritance tax.
Roger Morris, lending engagement at OSB Group, said: “It was the summer budget statement in the House of Commons by George Osbourne in June 2015 that transformed the buy to let sector. Since that time we’ve seen a significant amount of legislation impacting everything from stamp duty to interest relief and more recently EPC requirements, all of which have accumulated in an increase in professionalism and quality within the buy-to-let sector.
“This well constructed and informative educational guide will help put brokers in a well informed and educated position as we know that professional landlords are not standing idle. Many are taking advantage of the current situation to re-evaluate their investments, in order to maximise opportunities as normality returns.
“Whilst this guide is a valuable source of information for brokers, it shouldn’t be seen as a substitute for professional advice. We always recommend to our broker partners that they advise clients to seek advice from a professional tax adviser to ensure they are fully aware of their portfolio’s tax liability.”
Jodie Cummings-Barker, tax manager at EY, added: “Whether you hold an interest in UK property for personal use, as part of a property business or for investment purposes, the UK taxation landscape can be challenging.
“As echoed by Roger Morris, seeking professional taxation advice, especially for portfolio landlords, is absolutely essential and can not only add great value but is an important consideration for future planning.”
