Four year-end action points for landlords 

The end of the tax year on 5 April is always an important tax planning deadline. But this year it is particularly significant. Here is our summary of four major changes which could affect landlords.

Dividends
At the moment, dividend income is taxed at 0%, 25% or 30.55%, depending on the level of your total income. From 6 April this changes so, although the first £5,000 of dividend income is tax-free, the tax rates increase by 7.5% cross the board. This will affect landlords who hold their properties in companies, who in the past have probably extracted profits in the form of dividends rather than salary. For many, drawing extra dividends before the changes come into effect will make sense – but watch out - this does not apply to all.

Wear and Tear
Almost half of landlords will be affected by the removal of the 10% wear and tear allowance. From April all landlords will be able to claim for the actual cost of replacing furniture, furnishings appliances and kitchenware. Therefore it probably makes sense to defer all such expenditure until after the 6 April.

Stamp Duty Land Tax (SDLT) changes
From 1 April 2016 a 3% SLDT surcharge applies on the purchase of all residential buy-to lets or second properties. Completing a purchase before the deadline will avoid the additional charge. The new rate will also normally apply to property acquisitions by companies. If you are thinking of selling a property into a company as a means of extracting cash or as part of planning to avoid the changes coming in April 2017 which restrict tax relief on mortgage borrowing, then you should consider moving quickly to save SDLT.

Pensions
For higher earners (people who earn more than £150,000) the ability to make significant pension contributions is about to be curtailed. So for some it could be worth making the maximum possible contribution before 5 April 2016. Don’t forget that commercial or industrial property can be purchased within SIPP or SSAS pensions.