Property Business Tax Review 2024-25

A major change in the way that property income is taxed was the gradual reduction in the amount of tax relief that landlords of residential property could claim for finance charges: this includes mortgage interest. Accordingly, finance charges are now disallowed as a business expense and are replaced by a basic rate tax credit.

This change has impacted tax liabilities since 2017-18. Most at risk are buy-to-let, residential property owners who have acquired property by maximizing the use of cheap mortgages. In accountant-speak they are highly geared. This means that total borrowings are not much lower than the cost or market value of the properties they own.

There are strategies that can be used to lessen the impact of these changes, ranging at one extreme to selling properties to reduce debt, or incorporating property businesses. Neither option is for the faint hearted.

We have produced two check lists for landlords that may be of some help.

First, a list of the “red tape” that landlords need to comply with. It covers most of the main points. Secondly, a list of tax and related strategic options that landlords should consider prior to 6 April 2024.

Work though the check list that follows and if any apply to your circumstances call us at DMO to discuss your options.