Chester & Cheshire

Buy To Let Investors Will Pay Higher Taxes on Capital Gains

The Autumn Budget has meant that buy to let investors will pay higher rates on their capital gains, which means that the services of a good accountant in North Wales and Cheshire will become critical for many more people in order to make changes and make savings where required, so that they will not be left worse off at the fact that from January 2018, Indexation will be frozen.

But what exactly is Indexation? Put simply, the term defines a form of tax relief which enables gains to be reduced based upon the duration of ownership. Phillip Hammond’s Winter Budget has meant that gains by businesses, including incorporated landlords (or buy to let investors, to the Government) will be taxed at the general rate of corporation tax at 19 percent.

While it is expected that corporation tax will fall to 17 percent by 2020, two years is a long time to wait for many landlords which may consider themselves at a financial disadvantage due to the Indexation overhaul. But why exactly is this happening? Why has the Government suddenly started assuming that landlords are corporations?

Most financial blogs and news sources assume that this stance is to be the Government’s response to thousands of buy to let investors moving their properties into a company structure in recent years of course in the aim of avoiding the Government’s previous crackdown on tax relief for those who own property directly.

More bad news: the freeze to Indexation looks like it will be a substantial thing. As an example, landlords currently offset up to 75% of their mortgage interest against their profits. In 2018, this will fall to 50%, 25% in 2019, and absolutely nothing in 2020.

This indeed is bad news, but the Chancellor has spoken. The services of a good accountant to go over a landlord’s accounts and establish where and when money can be saved is absolutely paramount in situations like this, and the value of having other expenditures shifted about in order to compensate for this really cannot be ignored. 

Salisburys Accountants in St Asaph have an excellent reputation through their years of dealing with small to medium businesses and landlords in North Wales, Cheshire and Chester, and their friendly and knowledgeable team can help you maximise your property’s profitability while ensuring that you understand the process, the outcomes, and of course, the benefits of any actions which need to be taken.

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