A surprise move to change tax deductibility on rental properties has come as a shock to property investors. Owners of investment properties can no longer offset loan interest payments against rental income when calculating how much tax they have to pay. This will apply to all investment properties - for existing rentals it will be gradually introduced over four years.This will have an impact on you if:
- You own a rental property.
- You own an Airbnb or family holiday house.
- You are about to buy, or you’re planning to buy, a second property.
Bright line test extended
The other major tax change had been forecast for some time: the bright line test is now extended from 5 years to 10 years. This applies to residential property acquired on or after 27 March 2021. Now, if you buy a second property and sell it within 10 years, you will be taxed on any gains. The timeframe for new builds is 5 years. This does not apply to your family home, unless you occupy it less than 50% of the year.
This may also have an impact on your plans for investing in property, so talk to us about what the new tax rules will mean for your situation.