If you haven’t already started thinking about tax, now is definitely the time to do so.
Surprisingly I still come across landlords who are unaware that rental income needs to be declared and, in most cases, paid tax on. All rental income must be declared by law to the Inland Revenue.
There are elements of running a rental property that can be off-set against tax, but landlords of furnished properties will feel the pinch this year as the 10% wear and tear allowance now does not exist.
The end of the tax year is 5th April 2017, so although still a couple of weeks away, it is better to have an idea of how your rental year has been now so you can make changes if necessary; for instance, if you know you need to replace an item of furniture, look at doing so before 5th April to take advantage of this years’ allowances.
This change essentially means that landlords won’t be allowed to claim an allowance of 10% of the rental income, tax free, for the property that was furnished.
What Landlords need to quickly consider is that to get the same tax breaks they had been receiving before, they will now have to spend 10% of the rental income on replacement furniture and fittings.
So for example, if your rental income for the year on your property was £6000 you would have to spend £600 on replacement furnishings and appliances to get the equivalent ‘wear and tear’ allowance.
This might not be practical for many landlords with furnished properties, especially those who have professional lets with low wear and tear on their contents. But now is the time to take stock of what furniture you do have and if any could do with being replaced and you haven’t replaced any furniture already this year then it would be well worth doing it before 5th April!
This new tax year (2017/18) will also see the start of landlords being unable to offset part of the interest of their buy to let mortgages.
If you are unsure of how any of these changes will affect how much you pay on your tax bill, speak to your accountant who should be able to advise. Not got an accountant? Give Swansea-based Morgan Hemp a call.
If you want some free advice on how to maximise the rental potential of your property, drop me a call on 01792 430100 !
Related: Landlord wear and tear tax changes