Buy to Let Interest Relief: Currently, this is just a ‘Policy Paper’ but the plan is to restrict individuals on claiming mortgage interest as a cost against their property investment income, for individuals it will work as follows:
2017/18 75% of the interest can be claimed in full and 25% will get relief at 20%
2018/19 50% of the interest can be claimed in full and 50% will get relief at 20%
2019/20 25% of the interest can be claimed in full and 75% will get relief at 20%
2020/21 100% will get only 20% relief
For a 20% taxpayer that’s fine but for higher rate taxpayer it’s a disaster that will lead to them paying a lot more tax.
These rules will not apply to Companies, Companies will continue to claim full relief.
The current rate of Corporation Tax is 20% but its falling year on year and by 2020 it will be 18%.
Not only that, its the same rate no matter how many companies you have, as previously when there were multiple Corporation Tax Rates if you had associated companies the small companies rate was reduced in a marginal rate calculation.
Individual tax rates are:
Basic rate – 20% up to £31,785
Higher rate – 40% £31,786 to £150,000
Additional rate – 45% Over £150,001
There are other potential advantages to relating to SDLT, Capital Gains and Inheritance Tax.