How will the tax changes effect me?

Carl_Fitz

There's going to be some changes to higher rate tax payers/landlords but I only earn £29.5k in my day job so will the changes effect myself?

jem16

Carl_Fitz wrote: »

There's going to be some changes to higher rate tax payers/landlords but I only earn £29.5k in my day job so will the changes effect myself?

Doesn't look like you're a higher rate taxpayer so no.

agrinnall

booksurr wrote: »

I am surprised you don't know how income tax rates work?

Really? If this board has taught me one thing it's that I'm no longer surprised at how little the citizens of the UK know about the money taken off them by the authorities.

martinsurrey

booksurr wrote: »

The tax free allowance for 15/16 is £10,600, the basic rate tax bracket is £31,785 therefore higher rate tax starts at a total income of £42,386

is your rental taxable net profit (+ any other income outside of your job) >= £12,886??? (42,386 - 29,500)
if no any changes are irrelevant, as you will remain a basic rate taxpayer

I am surprised you don't know how income tax rates work?

actually your advice is wrong...

it should be

is your rental taxable net profit (+ any other income outside of your job) + Mortgage interest expense deducted from gross rent as an expense >= £12,886??? (42,386 - 29,500)

mortgage interest will reduce your tax liability(by 20% of the gross amount), but not your income liable to tax.

This change will push a lot of basic rate tax payers into the higher rate band. maybe not the OP, but they'll be a lot closer than they are now.

Carl_Fitz

Well I don't want to put my figures on a public forum but lets say my gross income from rent is £15k and my profit is £5k not excluding any repairs/maintenance. How close will I be to the higher bracket? thanks for any help guys

agrinnall

Carl_Fitz wrote: »

Well I don't want to put my figures on a public forum but lets say my gross income from rent is £15k and my profit is £5k not excluding any repairs/maintenance. How close will I be to the higher bracket? thanks for any help guys

Who don't you, nobody knows who you are? Anyway, from the figures you have given you are around £7K below becoming a higher rat taxpayer, although without also knowing your tax code it's impossible to be certain.

martinsurrey

Carl_Fitz wrote: »

Well I don't want to put my figures on a public forum but lets say my gross income from rent is £15k and my profit is £5k not excluding any repairs/maintenance. How close will I be to the higher bracket? thanks for any help guys

so gross rent is £15k, and profit is £5k, how much of the £10k expenses are mortgage interest?

Carl_Fitz

So if I had £1k of receipts for maintenance then £9k is interest. Thanks

martinsurrey

£29,000 salary +£15,000 rental income - £1000 allowable deductions = £43,000

assuming a normal tax code, you will pay a little bit more tax than you do now.

Carl_Fitz

Thanks, martin. I think I've grasped it now.

"Landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs"

Is this basic rate reduction going to be the 20% of the gross amount that you mentioned?

Putting it all through a limited company seems the way forward.

martinsurrey

Carl_Fitz wrote: »

Thanks, martin. I think I've grasped it now.

"Landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs"

Is this basic rate reduction going to be the 20% of the gross amount that you mentioned?

Putting it all through a limited company seems the way forward.

Exactly, now you work out your tax liability without deducting any mortgage interest, and then reduce that tax amount by 20% of the gross mortgage interest, a lot of accidental and small time landlords will be heavily effected, but don't yet realise (as they currently think of themselves as basic rate tax payers).