Buy to let landlords need to take action to reduce tax bills

Melanie Richardson


Some buy to let landlords who haven't taken into account the variety of tax changes within the sector may well soon be faced with problems. Research from Kent Reliance highlights that 20% of UK landlords have now either transferred property portfolios under the banner of a limited company or moved ownership over to a spouse. The research further highlights that one in seven of these landlords don't actually understand the reasons behind this.


Buy to let landlords need to review tax changes in the sector


Kent Reliance is a part of the OneSavings Bank and their research shows that time could be running out for landlords who haven't yet taken action or sought tax advice, particularly once the effects of the phased abolition of the payment of mortgage interest tax relief comes into force. The first of the three reductions to available tax relief was applied in April 2017, making it only possible to claim back 75% of the costs of finance in tax returns due in January 2019.


By the time April 2020 comes around, landlords will be unable to deduct any mortgage expenses from rental income when working out their tax.


Research from BDRC Continental shows properties have already been moved under the auspices of a limited company or transferred to the ownership of a spouse for 19% of landlords which will mitigate the effects of higher tax bills. A further 13% of landlords plan to carry out this procedure. The research also highlights that 15% of landlords have no understanding of the implications of this type of action, so they could be in for a shock when tax returns are filed for the 2017/17 year.


Up to 58% of smaller landlords, with between one and five properties, don't feel they would benefit from changing over to a limited company or swapping ownership over to a spouse. This drops to 27% for larger landlords, with over 20 properties.


Landlords have had almost three years' notice of these changes to the way in which mortgage interest will be treated and although most of them have made changes there are still quite a few needing to take immediate action and seek professional tax advice.


If you'd like to talk to our tax expert about your specific situation please get in touch with our Tax Partner Robin Stevenson using his contact details below:

Robin tax partner swindells east sussex accountants and tax advisors

Robin Stevenson - Tax Partner


Tel: 01825 763 366

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