Tax  

Tax changes advisers need to be aware of

Tax changes advisers need to be aware of

As the end of the tax year approaches, there are a number of changes advisers must be aware of, according to George Bull, senior tax partner at accountancy RSM.

Mr Bull said the biggest change is likely to be for buy-to-let investors.

Changes introduced in a previous Budget mean that since 2017, buy-to-let investors who pay income tax at the 40 per cent rate or higher, are no longer permitted to claim the full cost of mortgage interest against the rental income.

This change is being phased in, and in the current tax year, investors are permitted to claim 75 per cent of the interest costs against rental income, before the rule is fully abolished in 2020.

From 2020 only those paying income tax at the basic rate will be able to offset mortgage interest costs against rental income.

Ian Dyall, head of estate planning at Tilney, said the changes to the buy-to-let tax rules are "another nail in the coffin for buy-to-let investors.

Another tax rules to be aware of this year, according to Mr Bull, is the trading allowance and the property allowance.

The trading tax free allowance, of £1,000, applies to people who make a profit from selling items online.

Mr Bull said: "The significance of this is that if it is someone who isn't normally a self assessment taxpayer, and then they have to become one because they sell items on ebay or other such sites.

"That is a pain for a client or adviser to deal with. This tax-free allowance should mean that doesn't happen and HMRC are unlikely to argue over small amounts."

The property tax-free allowance, which is also £1,000, relates to individuals receiving an income from property hosted on sites such as AirBNB.

Mr Bull said: "I think HMRC take the view that the cost of enforcement is greater than the revenue they could collect for the smaller operator, but they are interested if people are doing it on a bigger scale."

The final change he highlighted relates to individuals that are non-domiciled in the UK for tax purposes.

The 2017 to 2018 tax year is the first in which those with non-domiciled status may have to pay UK tax on worldwide income, though Mr Bull said: "This is complex, and so most non-doms should probably take advice."

david.thorpe@ft.com