Planning Ahead - How Will You Structure Your Portfolio From 2016?

Planning Ahead - How Will You Structure Your Portfolio From 2016?
I trust you have had an excellent Christmas and New Year and have caught up on some much-needed have I!  :-) As we enter a New Year, it gives us an opportunity to think about how we want to move forward in our ventures.  No doubt you will have been reflecting during the festive season on the past year and what changes you would like to make into 2016.  With so many changes occurring within the property business, it pays to keep up and plan ahead so that you stay on top of your game.  In this month's article, I wanted to discuss one topic which is of particular importance to us as landlords.   With the Summer Budget announcement about the new landlord tax implications in the Finance Bill having been confirmed in the latest Autumn Statement, it is definitely time to think about planning ahead in terms of how to work with and potentially grow your portfolio from here. It has certainly been the hot topic of conversation here at Why Property Works over the last few months, so much so that I have been working on how to get the message out in a clear, concise way to best help you to get a grip on how this change will affect you going forward.   Essentially, the changes coming in will be phased in over the next four years until 2020.  The main impacts to your tax affairs will be as follows:
  • Mortgage Interest Relief (MIR) for higher rate tax payers will be reduced to just 20% (not the current relief of 40-45% for those paying a higher amount of tax).
  • This relief will now come in the form of a tax rebate, rather than be allowed against gross rent before tax is paid.
  • Currently, tax is paid net of all expenses, including mortgage interest payments.  By 2020, tax will be paid on gross rent after normal running costs, but before mortgage interest payments.  A rebate to the tune of the basic rate tax level of 20% will then be given on any mortgage interest payments made.
  • The main impact this could have if you are currently a lower rate tax payer (and if you are earning close to the limit either from PAYE, self-employed or property income, etc) would be to 'push' you into the higher-rate tax bracket.
As the result of a fantastic Group Coaching Call I ran before Christmas, I have put together a really useful document which explains this is for you in a more visual way.  If you would like to receive a copy, please message me here and I will pop it across for you via email. :-) My best advice for you is to seek proper tax advice from a tax professional who understands the property business and knows best how to mitigate tax for your particular circumstances.  This is vitally important for your forward planning. The good news is that there are ways in which you can work around this situation.  As a result of many questions coming in about this subject, I put together an even more comprehensive 'Questions and Answers' blog which you can access here. Here's to your property success in 2016 and beyond!   Hazel Hazel de KloeProperty Investor | Property Mentor | Speaker | Author The contents of this article are for educational purposes only and we make no recommendation of any particular investment. The price of property can decrease as well as increase and you make any investments in property at your own risk. © Why Property Works 2015 |