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Hello,
I wonder if anyone has any knowledge to the new rental property tax changes. I have 5 properties that are mortgaged that I currently rent out, my exwife was settled through our divorce on the equity within those properties. There is some equity in the properties but with the recent changes to rental property tax, I am really concerned as my ex wife is now claiming against the income from those properties through the Child Maintenance Service.
The new changes that are being introduced means that any mortgage for those rental properties can not be offset against the income by 2020.
I make a small income from the properties that I currently pay tax through my self-assessment and that is used to work out my Child Maintenance Service (CMS) assessment.
By 2020, when I can not offset the mortgages against the income, my self- assessment will rocket, and thus will my CMS assessment go higher too, even though I will not be making the profits due to the mortgage payments.
Does anyone have any information on whether the CMS will take into account that I would not be making the income on my self-assessment due to mortgage payments?
I do understand the problem you identified, it seems like an unintended consequence. You are being required by law to pay child maintenance on income that doesn't actually exist.
I very much doubt the CMS would take that into account, and I imagine if you call them and asked you're likely to get someone who has no idea what you are talking about.
Perhaps one to take up with your MP if you are so inclined. In your position I would just sell and use the money to work less and spend more time with the kids.
Isn't the fact that you can no longer claim tax benefit simply going to reduce your profit on these properties, so your income will reduce (ie, in simple terms, profit = income - mortgage paments - other expenses) - meaning your maintenance will reduce.
Unfortunately it’s the opposite. Before mortgage interest was considered a valid business expense and he could deduct it from his income resulting in a lower taxable profit.
Now he can no longer deduct mortgage interest from his income so his taxable profit is larger, he pays more tax and he pays more child maintenance.
The options I can see are either to suck it up, sell, or put everything inside a company ( but this is only worth it for large property portfolios ).
Thank you for your replies, unfortunately selling the properties is a non starter as the income generated from the sale will also be included in my self-assessment. Double stung from the ex-wife, settled property equity in divorce and now also paying CMS on the income...
Looks like its suck it up with the new tax legislation..
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