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Summer 2015 Budget - Landlords and Residential Property Owners


Posted on 9 July 2015

Which of the announcements made in the Chancellors Budget on 7 July should landlords and owners of residential property take note of?
Restrictions on deduction of costs of finance
Relief for the costs of financing the purchase of, or improvements to, let residential property have been announced.  They will be introduced gradually from April 2017 and will eventually restrict relief on costs such as mortgage interest and loans to buy furnishings to the basic rate of tax. 
Landlords with incomes at the higher tax rates will therefore see the tax cost of profits from their letting activities increase. 
At present the announcement seems to be restricted to individual owners and partnerships with corporate and trustee owners not being mentioned, however, this may change prior to the measures becoming operational.
Annual Investment Allowance
For owners of larger rental businesses the changes to place the annual investment allowance on a permanent footing may be relevant.
The temporary increase in the 100% tax deduction available for purchases of plant and machinery to £500,000 was due to reduce from December to a mere £25,000.  The announcement that this will now be set at £200,000 per annum permanently instead of changing each year will provide a stable basis for planning the purchase of equipment needed to invest in businesses and take them forward.
Note that capital allowances are not available for purchases of equipment in let residential properties but they are available for other equipment used within the letting business (such as office equipment) and are also available for equipment used in furnished holiday lettings.

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