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Landlord Tax Explained

  07 Oct 2016

When you start acting as a landlord, you are required to inform HMRC as you may be required to pay income tax. Failing to inform HMRC of your role as a landlord could result in you facing a penalty. Any profit that you receive from letting your property will be classed as income which means that it is subject to income tax.

The level of tax that you pay as a landlord will depend on the level of taxable income you receive. It is important to be aware that there are deductions you can make which will lower the level of taxable income you receive.

If you are classed at the basic rate of tax (up to £31,785), you’ll be required to pay 20% tax, if you are classed at the higher rate of tax (from £31,786 to £150,000), you’ll be required to pay 40% tax and if you are in the additional rate of tax (£150,001 and above), you’ll be required to pay 45% tax.

Changes to mortgage interest rate relief

It was announced in 2015 that changes would be made to the mortgage interest rate relief, with it being set at the basic income tax rate of 20%. This means that landlords who would have been on the higher and the top rate of tax will no longer receive the full relief that they used to receive.

This will be phased in with the changes coming in as follows:

  • For 2017/18, deductions from property income will be limited at 75% of finance costs, while 25% will be made available at the basic rate.
  • For 2018/19, deductions from property income will be limited at 50% of finance costs, while 50% will be made available at the basic rate.
  • For 2019/20, deductions from property income will be limited at 50% of finance costs, while 50% will be made available at the basic rate.
  • From 2020/21, all of the deductions from property income will be provided at the basic rate of tax reduction.

Changes to stamp duty charges

As of April 2016, any landlord, property investor, or individual buying an additional property in the UK, which carries a value of £40,000 or more, will face an additional stamp duty charge of 3% on their purchase. This means landlords will need to evaluate the impact of buying additional property to let out. This calculation should be undertaken as part of their rental yield calculation as it will increase the amount of money that they have to pay in order to buy the property.

If a landlord is still able to obtain an attractive rate of rental yield after the additional stamp duty or they can offset the additional charge through raising rent or decreasing maintenance spend, they may decide that there is no negative impact on acting as a landlord. However, raising rents or reducing maintenance spend can only work for so long without bringing other issues, so there is a need for landlords to think carefully about the impact of this change to stamp duty charges.

Thinking of selling or letting your property?

If you are thinking of selling or letting your property, the first thing you will need is an accurate valuation. Our team of property professionals can help and talk you through the advantages and any concerns you have about having a board advertising your property for sale or to let.



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  • " I've dealt with some horrible agencies whilst renting in the past but I am glad we had Jezzards as our last. Didn't know that someone so professional and understanding and true to it's word existed in the business. I locked myself out once and they were there in  20 mins to assist. Heating stopped in the night and their out of hours assistance helped sort us out. Any problems or issues, were very promptly and effectively dealt with...I didn't even have to chase them. Our exit was quick, refunds took some time due to overlooked issues, which Victoria Jezzard looked into personally, and all done in 3 days. Dorathy was our handler and she was ace!! "

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  • " Everybody at Jezzards Estate Agents, Surbiton was very patient and sympathetic to our needs as non-residents looking to buy in a completely new area. We were provided with maps and advised on the layout of the town and nearby areas. We would particularly like to thank Gaj Murali for showing us round various properties in the pouring rain and taking a personal interest in helping us find the right property. Thank you Gaj. "

    Anonymous August 2019
  • " just like to say that once agin the service from Jezzards has been exceptional and special praise tio Dorothy whio handled my lettiing from start to finish perfectlty and made sure all parties were happy. great company to deal with and would recommend to others without hesitation. thank you once more "

    Rino August 2019