When the Chancellor announced he was curbing tax breaks for landlords in Summer Budget 2015, it altered two valuable reliefs landlords could claim.

‘Wear and tear' allowance will be scrapped in April 2016. Currently landlords can lower their tax bill by 10 per cent to pay for the upkeep of their properties, whether they have spent any money or not. From April 2016, the tax relief will only apply to the costs they actually incur, and have the receipts to prove it.

‘Mortgage interest relief’ - From April 2017 many landlords may not be able to deduct all of their finance costs in working out their income, they will receive a basic rate reduction from their income tax liability. The impact will be felt most by higher rate taxpayers, as the tax relief will reduce from 45 per cent to 20 per cent over three years. This may significantly increase the tax burden on buy-to-let landlords.

Buying

Stamp duty land tax changed in December 2014. It is charged based on an increasing percentage of the portion of cost of residential property from a nil rate on up to £125,000 to 12 per cent if the portion is above £1.5 million.

Renting out

Commercial or residential rental properties are mainly treated as investments, subject to income tax, and if you are running a property business, class 2 national insurance.

Income from any property must be reported through a self-assessment tax return if you receive between £2,500 to £9,999 after allowable expenses, and £10,000 or more before allowable expenses.

The rent a room tax relief scheme has also been updated. From April 2016 homeowners may be able to earn up to £7,500 tax-free per year for letting out rooms to lodgers.

Selling

Capital gains tax on commercial and residential properties (which are not your own residence) is levied at either 18 per cent or 28 per cent. The higher rate applies to all gains over the individual’s annual CGT exemption, currently at £11,100 and when the gain will take the individual’s total taxable income and gains over £43,000.

If you own commercial or residential property, the value of the property less debt may push your estate over the inheritance tax threshold, currently £325,000 or up to £650,000 for married couples and civil partners. Anything over that could be taxed at 40 per cent.

For more details please contact Alastair Byrne at JWPCreers on (01904) 717260 or ajb@jwpcreers.co.uk