Changing times

According to a new survey 44% of landlords are planning to make changes to their present circumstances in direct response to tax changes imposed on the sector over the last 18 months. Since April 2016, three major tax changes have impacted landlords. Second home buyers have had to pay a 3% stamp duty surcharge, increasing tax on a £300,000 property from £5,000 to £14,000.

This was followed by the abolition of landlords’ ability to claim a 10% tax break for “wear and tear”, only letting them deduct the costs they incur. In a further blow, changes to mortgage interest tax relief were brought in from April, meaning landlords can only offset 75% of their mortgage interest against their profits. This will fall to 50% in 2018, 25% in 2019 and to zero by 2020 when it will be replaced by a 20% tax credit.

The vast majority of landlords are individuals who own one or two properties and use buy-to-let as a part-time income supplement, they are less likely to keep tabs on legislative changes. Worryingly the survey found 26% of respondents said they were unaware of changes affecting mortgage interest tax relief and a further 23% did not know about the additional 3% stamp duty payable on buy-to-let and second home purchases.

While 21% of landlords said the changes will not affect their buy-to-let business, 25% indicated they will need to increase rents to tenants. Over 50% said they have or are considering incorporating their BTL business to avoid the new tax changes.

If you are looking for a new or re-mortgage please do make contact and one of our advisers will be happy to help.