Tag Archives: tax relief

Landlords to receive less tax relief on interest

In a change that will impact residential landlords, the amount of income tax relief available on residential property finance costs will be restricted to the basic rate of income tax. This change will mean that 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.

The restriction in the relief will be phased in over a four year period as follows:

  • in 2017/18, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction;
  • in 2018/19, 50% finance costs deduction and 50% given as a basic rate tax reduction;
  • in 2019/20, 25% finance costs deduction and 75% given as a basic rate tax reduction;
  • from 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

These rules do not apply to residential properties held in companies.

In addition rules may further restrict the relief which is due where the individual’s property income or total income is less than the amount on which basic rate relief is due. The computation is complex so please do get in touch if you would like us to review your position.

Internet link: GOV.UK guidance

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Research and Development (R&D) relief

R&D relief gives additional tax relief to companies for expenditure incurred on R&D projects that seek to achieve an advance in science or technology. For an SME company which incurs losses when conducting R&D activity, a tax credit can be claimed by way of a cash sum paid by HMRC.

From 1 April 2014 the rate of the R&D payable tax credit will be increased from 11% to 14.5%.

Internet link: Gov.uk Budget