Row of houses

Planning for property owners

Tom Elliott
Row of houses
Property tax changes in recent years, including increased Stamp Duty Land Tax on purchases of second homes, a higher rate of capital gains tax on residential property disposal, and the withdrawal of the 10% wear and tear allowance for furnished lettings.

The most recent and perhaps significant change was the announcements of a withdrawal of higher rate tax relief for interest expense on debts related to dwelling houses.

This started to be passed in from the current tax year 6 April 2017 with a restriction relating to 25% of the interest expense.

In the year to 5 April 2019, the restriction will be applied to 50% of the interest expense, with the percentage increasing to 75% and 100% in the years to 5 April 2020 and 2021 respectively. This will add further pressure for buy-to-let landlords with significant debt to de-leverage their property portfolios or alternatively (in some cases) face income losses.

If you haven't already, model the new rules to assess the impact on rental yield, and where necessary take action. In terms of tax, the first time landlords will see an impact on their pocket will be in January 2019 when their tax bills may be higher.

Some planning points to take into account are:

  • changing the structure of the ownership of the property
  • refinancing – it is more important than ever to get the best rate possible on all borrowings
  • when buying a buy-to-let property, take advice on how best to structure the acquisition and its ownership.

Before the end of the tax year, the following should also be considered:

  • transferring a share of property standing at a gain to a connected person to make use of any outstanding capital gains tax annual exemption (up to £11,300 per person in 2017-18)
  • re-balancing property ownership between spouses to make the most of income tax bands and allowances
  • transferring property or a share of property into trust (where gains exceed the annual exemption) to reduce exposure to inheritance tax on death without triggering capital gains tax charges. Care needs to be taken to ensure the transfer does not trigger a lifetime inheritance tax charge.

How can we help?

With property matters, it is always important to take tax advice due to the impact property has on all areas of taxation. There are opportunities for planning which can be taken advantage of every tax year.

For more information please contact your local Crowe contact.

Contact us

Tom Elliott
Tom Elliott
Partner, Head of London Private Clients