Written By Em

Em Morley

Landlords have Better Understanding of the Tax Relief Changes as they Take Effect

Published On: April 6, 2017 at 8:48 am

Tags: landlord taxes,mortgage interest tax relief,tax changes

Landlords have a better understanding of the Government’s tax relief changes as they take effect today (Thursday 6^th April 2017), according to the latest PRS Trends Report for Q1 2017 from Paragon Mortgages.

Landlords have Better Understanding of the Tax Relief Changes as they Take Effect

The study found that there is an increased understanding of the implications of the tax relief changes amongst landlords.

The changes will be introduced gradually from today until 6^th April 2020.

78% of landlords reported an understanding of the personal implications of the tax relief changes, up from 71% in Q4 2016.

This increase in understanding is paired with a smaller percentage of landlords saying that they do not understand the implications (7% from 11%), or they require more information (13% from 18%), and is a further indication that landlords are preparing for the impact of the changes.

Reassuringly, landlord optimism was stable in Q1 2017, with the overall average rating of prospects for the private rental sector over the next 12 months now at 6.7. This maintains a modest upward trend since Q1 2016, and suggests that confidence is returning amongst landlords following a turbulent 18 months, as they gain greater understanding of the pressures they are likely to face and develop strategies to mitigate at least some of the impact.

This guide from the Government explains exactly how the tax relief changes will affect you: /government-guide-tax-relief-changes-residential-landlords/

John Heron, the Managing Director of Paragon Mortgages, comments: “It’s encouraging to see that the private rental sector has not been negatively impacted to the degree that had been widely predicted, despite some turbulence over the last couple of years. This increase in understanding, combined with effective financial planning, may be the key drivers behind a steadier picture in terms of overall optimism amongst landlords.

“However, we remain cautious, as landlords will not be fully impacted for some years yet and, whilst we have been able to track a modest recovery in confidence since 2015, the sector is still some way off its peak; the private rental sector is finely balanced and will remain so for some time.”

50% of landlords could quit sector due to tax changes

Published On: April 6, 2017 at 8:45 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlords,legislation,mortgage interest tax relief,tax

The most recent analysis from AXA has revealed that as a result of the phasing out of mortgage interest tax relief, more landlords believe they will be affected than Government estimates.

Changes to mortgage interest tax relief calculations come into force from today, with AXA’s figures suggesting that half of landlords plan to quit the market by 2020. Many cite the fact that they are being unfairly targeted.

Worse Off

AXA’s research indicates that over 40% of landlords feel they will be worse off as a direct result of the tax changes. This comes despite Government estimates that 82% will not have any additional tax to pay.

However, AXA’s research suggests that today’s change, coming on top of a host of legislation targeting landlords in recent years, means that many will leave the sector by 2020.

21% said that they plan to sell all of their portfolio, while 10% plan to reduce. 7% said that they will move to a commercial property ownership. 8% said they plan to transfer ownership of their property to a spouse or other family member, who is in a lower tax bracket, thus avoiding tax.

50% of landlords could quit sector due to tax changes

Scapegoats

Two-thirds of landlords questioned said that they feel stigmatised for running their rental business.

The stark reality is that only 4% of private landlords have a portfolio large enough to give up work and live off the profits. On average, the typical UK landlord makes £343 rental profit every month. Profit levels do vary widely across the country, from £297 in the West Midlands to £713 in London.

Gordon Rutherford, Head of Marketing at AXA Insurance, noted: ‘Landlords have been subject to one piece of new legislation after another in recent years, much of it very complex indeed. We see a real confusion as to what the new tax changes will mean, with Government and landlords giving very different estimates of the impact.’[1]

‘We need to remember that few landlords are professional property tycoons: two thirds in the UK are ‘accidental’ landlords. They tend to own just one rental property that they’ve inherited or are finding hard to sell, and they make a modest income once time and expenses are out. They do feel increasingly apprehensive, as we can see from the numbers thinking of withdrawing their properties from the rental market in the coming years,’ Mr Rutherford added.[1]

[1] http://www.propertyreporter.co.uk/landlords/almost-50-of-landlords-plan-to-quit-due-to-unfair-tax-change.html

Mortgage Interest Tax Relief Changes Introduced from Today

Published On: April 6, 2017 at 8:13 am

Author: Em Morley

Categories: Landlord News

Tags: landlord taxes,mortgage interest tax relief,section 24,tax changes

The Government’s mortgage interest tax relief changes for landlords will be introduced gradually from today (Thursday 6^th April 2017).

Mortgage Interest Tax Relief Changes Introduced from Today

From today, the amount of mortgage interest and other finance costs that landlords can offset against tax will be reduced to the basic rate of Income Tax. The Government measure will be gradually introduced until 6^th April 2020, when it will be fully implemented.

This guide explains exactly how the mortgage interest tax relief changes will affect you: /government-guide-tax-relief-changes-residential-landlords/

Landlords must note that limited companies are exempt from the mortgage interest tax relief changes, which has caused many investors to change the structure of their portfolios.

Shaun Church, the Director of Private Finance, comments on the changes: “The new mortgage interest tax relief rules for landlords are threatening to become an example of Government regulation resulting in unintended consequences. By hitting landlords’ profits, the changes may ultimately make it even more difficult for prospective first time buyers to get onto the housing ladder.

“Not being able to fully deduct finance costs from their taxable income will leave some landlords with a tax bill that outweighs their profits. As a result, many will look to increase rents to compensate for the loss in revenue. Not only this, the changes are also limiting landlords’ investment appetite. With fewer landlords investing in new buy-to-let properties at a time of already restricted housing supply, and rental demand remaining high, this too could result in higher rents.”

He continues: “The only way of getting around the changes is to invest through a limited company. However, there are fewer mortgages available to these types of investors and they typically come with much higher rates of interest. There are also a whole host of tax implications to consider that make moving to a limited company structure far from a straightforward decision. Those considering it should always seek help from an independent mortgage broker, who can also provide access to a tax adviser.”

Worryingly, it was revealed yesterday that the majority of Britons are not aware of the mortgage interest tax relief changes.

If you haven’t already, it is essential that you seek financial advice regarding the new measures.

Aldermore changes five-year fixed BTL

Published On: April 5, 2017 at 1:19 pm

Author: Em Morley

Categories: Finance News

Tags: Aldermore,Buy-to-Let,buy-to-let mortgage,landlords

Aldermore has revealed a number of changes to its five-year fixed rate buy-to-let mortgages. This includes a review of its position regarding affordability.

The Bank has moved to alter its affordability stress rate to the higher of the pay rate or the reversion rate +0.75%, down from pay rate or 5.5%.

In addition, it has reduced reversion rates, which now start from 3.23%.

Five-year products

What’s more, Aldermore has launched some new five-year fixed rate products.

New standard buy-to-let rates include a 3.28% at 75% LTV with a reversion rate of 3.23% and a 5.28% for an 80% LTV, with reversion rate of 4.53%.

For limited companies, five-year fixed rates now start from 4.08% at 75% LTV with a reversion rate of 3.33% and at 5.28% up to 80% LTV with reversion rate of 4.53%.

Aldermore changes five-year fixed BTL

Changes

Charles McDowell, Commercial Director of Mortgages at Aldermore said: ‘These changes are good news for both landlords and limited company buy-to-let investors.’[1]

‘Whilst there have been many changes to the buy-to-let market over the last 12 months, the improvement in affordability on our 5 year fixed products will provide much needed support to the market. The increasing number of renters combined with the on-going supply pressures across the private rental sector is evidence of the integral role buy-to-let plays within the UK’s housing market. Our new products reaffirm our commitment to supporting UK landlords,’ he added.[1]

[1] http://www.propertyreporter.co.uk/finance/aldermore-revamps-five-year-fixed-btl-range.html

UK property supply increases for third straight month

Published On: April 5, 2017 at 9:51 am

Author: Em Morley

Categories: Property News

Tags: Buy-to-Let,housing market,new property listings,property

UK property supply increased by 3.7% month-on-month in March, according to the latest report from House Simple. This was the third straight month in which supply has risen.

This said, new listings in the capital fell flat during the last month, sliding by 0.3% over the period. The largest falls were experienced in Lewisham and Hounslow, with new listings dropping by 41.4% and 40% respectively.

Rises

When London is excluded from the findings, UK property supply actually rose by 10.3%, which is a firm example of the divide being seen across Britain.

In fact, listings increased in more than three quarters of UK towns and cities in March. Stirling and Dundee, both in Scotland saw the largest rises in supply, with 87.8% and 70.9%.

Of the 25% of cities and towns that saw a fall in supply during March, Telford saw the largest drop, with figures down by 23.3%. Barnsley and Warrington also saw substantial falls, of 13.9% and 12.1% respectively.

UK property supply increases for third straight month

Selling Season

Alex Gosling, CEO of House Simple, observed: ‘Although new listings were up in March, we’d have hoped to see more sellers, particularly in London, putting their homes on the market as we enter the Spring’s peak property selling season.’[1]

‘We need a supply boost in April, because the demand from buyers remains strong and thanks to the continued competitive mortgage deals still on offer, they are more than committed to purchasing,’ he added.[1]

[1] http://www.propertyreporter.co.uk/property/uk-property-supply-rises-for-third-consecutive-month.html

Number of Landlords using Limited Companies on the up

Published On: April 5, 2017 at 9:42 am

Author: Em Morley

Categories: Landlord News

Tags: landlord taxes,limited companies,limited company,mortgage interest tax relief,tax changes

The number of landlords using limited companies to manage their buy-to-let portfolios is on the up, in the face of greater Government regulation, according to new figures.

Number of Landlords using Limited Companies on the up

Fresh data from Mortgages for Business shows that 77% of all buy-to-let purchase applications were made via a limited company in the first three months of this year, up from 69% in the final quarter of 2016, and just 21% prior to the mortgage interest tax relief changes being announced in the Summer Budget 2015.

REMEMBER – The amount of mortgage interest and other finance costs that landlords can offset against tax will be gradually reduced from tomorrow (Thursday 6^th April): /government-guide-tax-relief-changes-residential-landlords/

In response to greater demand, the volume of mortgage products available to limited company borrowers has risen by more than a third, to 266, with limited company rates now at a record low.

From a landlord’s perspective, it has been a difficult year following various new measures, including higher Stamp Duty, tougher lending criteria, and the phasing out of mortgage interest tax relief, leaving many investors with little alternative but to incorporate, to maintain investment levels in the private rental sector.

Limited companies will be exempt from tomorrow’s changes to mortgage interest tax relief.

The CEO of Mortgages for Business, David Whittaker, says: “With the changing face of the buy-to-let mortgage market, it is no surprise that lenders are keen to appeal to limited company borrowers.

“We have been recommending for some time that our clients seek professional tax advice to determine whether incorporation is the most suitable route for their circumstances, and these figures can only further encourage landlords to consider their position.”

Landlords, have you taken any steps, such as setting up limited companies, to prepare for tomorrow’s tax changes? If you have not yet considered how the changes will affect you, it is wise to seek financial advice.