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April tax changes on the way for landlords

27 January 2016

Nine big tax changes are on the way for landlords in April 2016Nine big tax changes are on the way for landlords in April 2016 – and now’s the time to check finances to take the best advantage of the new rules.

Chancellor George Osborne has radically revamped tax in three main areas – buy to let, savings and pensions.

Here is a checklist of the 10 major changes:

• Wear and tear

The 10% wear and tear allowance for furnished buy to lets is axed and a new replacement allowance takes over for all landlords

• Stamp duty surcharge for property investors

Buy to let investors and second home owners in England and Wales face a 3% top-up on stamp duty due on homes worth more than £40,000

• Rent a room relief

Owners and tenants renting to lodgers see rent a room relief soar from £4,250 a year to £7,500 a year

• Flat rate state pension

Anyone reaching the state retirement age receives the single-tier (flat rate) state pension worth £155 a week to all pensioners.

Watch out for qualifying years to pick up the full rate – the old state pension required 30 years of work, but the new flat rate pension has a lower limit of 35 years.

• Tapered pension contribution allowance

The annual amount a retirement saver can pay into a pension is tapered according to earnings between £40,000 and £10,000 a year. Those on £150,000 are restricted to the £10,000 cap

• Lifetime allowance

The pension lifetime allowance is reduced from £1.25 million to £1 million. More about the lifetime allowance

• Offshore pension death benefits revamped

Tax rates on taxable lump sums paid as death benefits from Qualifying Recognised Overseas Pension Schemes (QROPS) are slashed from 45% to the recipient’s marginal rate – bring expat pensions in line with UK rules

• Scottish rate of income tax

The new rate comes into force for anyone living in a Scottish post code

• Tax free personal savings

A new annual personal tax allowance for cash savers outside ISAs

• Dividend allowance for directors and shareholders

Another new annual allowance of £5,000 for anyone trading as or investing in a company

The government has published a list of personal and basic rate limits for income tax for the 2016-2017 and 2017-18 tax years here