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Landlords in Scotland pay the most property tax

Landlords in Scotland pay more tax on their rental profits than those in England, says a leading tax consultancy. That’s because the rate of income tax is higher in Scotland than south of the border.

Although many taxpayers earning less than £24,000 a year pay lower rates than their counterparts in England, those earning more pay an extra 1 per cent income tax.

For the 2019/2020 tax year, landlords with a gross income of between £24,945 and £43,430 pay a rate of 21 per cent, compared to 20 per cent in England; while higher rate taxpayers pay 41 per cent instead of 40 per cent and additional rate taxpayers are charged 46 per cent against 45 per cent.

Stephen Oates, tax director with Scottish tax consultancy French Duncan, said: “From this April three quarters of any interest paid on buy-to-let borrowing will be eligible for a 20 per cent tax credit with the balance of interest deductible from rental income.

“While this sounds complicated the effect is alarming on the profitability of buy to let investment and Scottish landlords face a 15 per cent greater reduction in net income by next year than their counterparts in England and Wales.

Oates went on to explain how the tax changes impact landlords in Scotland.

“A higher rate taxpayer in Scotland with a rental income of £12,000 and interest on a buy to let mortgage of £8,000 will find their net income down to £1,100 - £100 less than south of the Border for the 2019/20 tax year, and less than half the level it was in 2016/17.

“From the 2020/21 tax year it will be down again to just £680, which is 15 per cent lower than a landlord in England and is 28.8 per cent less than the net income four years earlier. Because of this many will begin to question the value of their property investment.”

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