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Restrictions on residential property interest
Legislation has already been enacted to restrict interest relief for landlords.
From 6 April 2017, landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for these finance costs. Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying loans or mortgages.
The restriction will be phased in with 75% of finance costs being allowed in 2017/18, 50% in 2018/19, 25% in 2019/20 and be fully in place for 2020/21. The remaining finance costs for each year will be given as a basic rate tax reduction but cannot create a tax refund.
These restrictions apply to:
• UK resident individuals that let residential properties in the UK or overseas
• non-UK resident individuals that let residential properties in the UK
• individuals who let such properties in partnership
• trustees or beneficiaries of trusts liable for income tax on the property profits.
UK and non-UK resident companies are not affected nor landlords of ‘Furnished Holiday Lettings’.
Enlarging Social Investment Tax Relief
Significant amendments to the Social Investment Tax Relief (SITR) will be legislated for in Finance Bill 2017 to:
• increase the amount of investment a social enterprise may receive over its lifetime
to £1.5 million, for social enterprises that receive their initial risk finance investment no later than seven years after their first commercial sale. The current limit will continue to apply to older social enterprises
• reduce the limit on full-time equivalent employees to below 250 employees
• exclude certain activities, including asset leasing and on-lending. Investment in nursing homes and residential care homes will be excluded initially. However the government intends to introduce an accreditation system to allow such investment to qualify for SITR in future
• exclude the use of money raised under the SITR to pay off existing loans
• clarify that individuals will be eligible to claim relief under the SITR only if they are independent from the social enterprise
• introduce a provision to exclude investments where arrangements are put in place with the main purpose of delivering a benefit
to an individual or party connected to the social enterprise.
The changes will take effect for investments made on or after 6 April 2017.
8 Business Tax
Budget Summary 2017