The removal of mortgage interest relief from tax deductibles for the UK’s buy to let landlords is set to begin its remorseless impact on landlord’s cash flow from April 2017.

For Steve Bolton and Chris Cooper, this tax change was step too far. They approached Cherie Blair QC, to argue for a judicial review of the legislation in the High Court.

The judge was not impressed and refused permission for leave to proceed.

The Rental Landlords Association vice-chairperson, Douglas Haig, was at the hearing. He said:

“Whilst it is now being judged as a legal tax that doesn’t make it a just or fair tax and the Government still doesn’t seem to fully understand the impact it will have on housing supply and economic activity.

“While landlords will be affected the real losers with be the tenants as living costs continue to increase.”

Bolton and Cooper issued a joint statement following the hearing:

“It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.

“Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.

“For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market.

“Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.”

You may like to check out the following points. In many cases it would seem that local authorities have overall control over who can, or cannot, claim for reduced rates.

Second homes

You may pay less Council Tax for a property you own or rent that’s not your main home.

Councils can give furnished second homes or holiday homes a discount of up to 50%. Contact your council to find out if you can get a discount – it’s up to them how much you can get.

Empty properties

You’ll usually have to pay Council Tax on an empty home, but your council can decide to give you a discount – the amount is up to them. Contact your council to ask about a discount.

Your council can charge up to 50% extra Council Tax if your home has been empty for 2 years or more (unless it’s an annexe or you’re in the armed forces).

When you don’t pay Council Tax

If you’re selling an empty property on behalf of an owner who’s died, you only start paying Council Tax 6 months after you get probate.

Some homes don’t get a Council Tax bill for as long as they stay empty. They include homes:

• of someone in prison (except for not paying a fine or Council Tax)
• of someone who’s moved into a care home or hospital
• that have been repossessed
• that can’t be lived in by law, for example if they’re derelict
• that are empty because they’ve been compulsory purchased and will be demolished

You may get a discount if your home is undergoing major repair work or structural changes, for example your walls are being rebuilt.

If your property’s been refurbished

Your council will tell you when you have to start paying Council Tax if you’ve been carrying out major home improvements on an empty property or building a new property.

You’ll get a ‘completion notice’ that tells you the date you must start paying Council Tax.

If your property’s derelict

Your property’s only considered derelict if it:

• isn’t possible to live in it, for example because it’s been damaged by weather, rot or vandalism
• would need major structural works to make it ‘wind and watertight’ again

You can apply to get a derelict property removed from the Council Tax valuation list. Follow the process for making a formal challenge to the VOA.

1 October 2016 – Due date for Corporation Tax due for the year ended 31 December 2015.

19 October 2016 – PAYE and NIC deductions due for month ended 5 October 2016. (If you pay your tax electronically the due date is 22 October 2016.)

19 October 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2016.

19 October 2016 – CIS tax deducted for the month ended 5 October 2016 is payable by today.

31 October 2016 – Latest date you can file a paper version of your 2016 Self Assessment tax return.

1 November 2016 – Due date for Corporation Tax due for the year ended 31 January 2016.

19 November 2016 – PAYE and NIC deductions due for month ended 5 November 2016. (If you pay your tax electronically the due date is 22 November 2016.)

19 November 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2016.

19 November 2016 – CIS tax deducted for the month ended 5 November 2016 is payable by today.

If you use your home for business purposes, rent out parts of your home whilst you are still in residence or if you rent out your home while you are resident elsewhere, you may need to consider the tax consequences. This article covers some of the tax issues that you may need to consider:

Use of home for business purposes

If the amount of space you use is limited to say one room, and if there is a duality of use (for example you may have a home office in the corner of a spare bedroom or your office may double as a hobbies room), then you should be able to charge your business a nominal amount to cover the “running costs” of the space occupied. Your claim will need to be restricted on a time basis to disallow the private use proportion.

Claims that fit into this category should cause you no personal tax issues as long as they are based on a realistic apportionment of actual costs and are discounted for private use.

It will also be unlikely that you will suffer any charge to Capital Gains Tax when you sell your home.

Renting a room

From 6 April 2016, you can let out a room or rooms in your house as furnished accommodation (not an office) and as long as the annual rents received do not exceed £7,500 per year (prior to 6 April 2016 the annual limit was £4,250) you will have no Income Tax to pay. If the rent is more than the limit, then only the excess is taxable. The “normal” basis (rents less allowable costs) can be claimed if this produces a better result.

If two persons are entitled to share the rental income, the above annual tax-free limits are halved.

Longer term lets when you are not in residence

If you let out your home, for example if you work abroad for a period of time, you will be subject to Income Tax on your rental profits.

When you subsequently sell your home there may also be Capital Gains Tax considerations. When you sell, a proportion of any gain that relates to the period (or periods) of letting may be taxable. 

However, provided the property was your home at some time, you can claim reliefs, including principal private residence relief for the time it was your main residence, plus the last 18 months of ownership. Also, there may be some “lettings relief” relating to periods your home was let as above.

Homeowners’ private residence relief (for CGT purposes) is worth protecting. If you are considering any financial transaction concerning your home that you are concerned may have Income Tax of CGT implications, please call. It is better to sound out professional advice before the event…   

Generally speaking, any business expenditure that you make up to seven years before you actually start trading, is treated for tax purposes as if it was incurred on the first day of trading.

This expenditure includes rent, rates, insurance, wages and other costs that you have had to pay.

You can also claim capital allowances for qualifying assets. Again, they are treated as being made on the first day of trading. However, assets that you have previously owned, that you introduce into your new business, will need to be valued at market value at the same date. These might include your car or personal computer.

Repairs can be a tricky item, as HMRC may want to treat them as improvements to your business property that were incurred to bring them to a working standard prior to commencement of trade. If they succeed in their argument HMRC would not allow a deduction as a revenue expense.

Repairs undertaken before commencement of trade should be allowed if the following three points apply:

1.    The costs are regular maintenance rather than improvements.

2.    The repairs were not incurred to make premises fit for trade.

3.    The price paid for premises was not reduced to account for repairs to be made.