Kent Reliance for Intermediaries and EY have worked together to produce an educational guide for brokers based on the rule updates to the UK tax system.
The guide entitled “UK Tax Relief on Finance Costs” has been compiled to inform its intermediary partners 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.
For example, the guide explains in 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.
Roger Morris, group lending engagement at OSB Group, said: “It was the summer budget statement in the House of Commons by George Osborne 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.”