Posts with tag: buy-to-let taxes

The Effects of Tax & Finance Changes on Buy-to-Let

Published On: September 1, 2017 at 8:10 am


Categories: Finance News

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By Paul Mahoney, Managing Director of Nova Financial

Paul Mahoney Nova Financial

Paul Mahoney, of Nova Financial

There is presently much debate in the buy-to-let community and in the press with regards to how recent events and legislative changes are likely to affect the market, and whether buy-to-let is still a viable investment option.

Although, I’m confident that if you’re reading this article, that you’d be familiar with the changes, for clarity, I will name a few;

To date, landlords have been very resilient and, although some surveys suggest a slowdown in buying appetite and some considering selling, at Nova Financial, we’ve experienced the opposite. Our clients are simply buying properties at lower values and with higher yields, predominantly in the North West of England. These properties circumvent the repercussions of the changes by generating more profit, hence tax doesn’t hurt as much. They also fit into the lower Stamp Duty thresholds and solve mortgage servicing issues.

There was speculation that the changes would result in increased rents due to landlords trying to cover their increased tax bill and buying costs, however, to date, this hasn’t occurred. I believe that many overestimate the landlord’s control over rents, as they do not set rents, the market does and, if a landlord charges too much for their property, it won’t rent. However, if the changes result in less supply of rental properties available and, given there is a growing demand, rents will go up due to the market.

The number of new purchases have fallen, especially since the introduction of the Stamp Duty premium in April 2016. This is a concern, as new builds are the new supply that is required to solve the UK housing crisis. If new builds aren’t bought, then they aren’t built, and we have very little chance of building the number of houses needed per annum. This will drive house prices and rents higher. I concur with recent comments made by Tory MP Iain Duncan-Smith, that the Government should incentivise landlords to buy new builds to help solve the abovementioned problem.

It seems very unlikely that section 24 will be reversed any time soon, especially given the Parliament’s current workload with Brexit to be resolved, however, I’d say there is a slight chance that the Stamp Duty premium could be changed. Many viewed the changes as an attempt to professionalise the buy-to-let market, which, in a way, it has done, by driving many to invest through limited companies, whether this be good or bad. It is very likely though that landlords were viewed as an easy target, due to bad public opinion, for a tax grab.

Buy-to-let is still a very viable and potentially lucrative investment. At Nova Financial, most of our clients are currently achieving net yields on funds invested of 10%+ and, add to that the average growth in housing over the past 20 years per annum of 5%+, that brings the yearly returns on cash invested to over 30%! This return may seem very high, but that’s the benefits of high levels of borrowings at low interest rates when investing in high yielding growth areas. This is what separates property investment as the clear winner from all other investment options.

If you have any questions or would like to determine how Nova Financial can be of assistance, please call 0203 8000 600, visit or email


Landlords Shouldn’t Pay Extra for Limited Company Mortgages

Mortgage lenders have been criticised for charging extra on limited company buy-to-let products by Foundation Home Loans (FHL), a specialist buy-to-let mortgage provider.

Landlords Shouldn't Pay Extra for Limited Company Mortgages

Landlords Shouldn’t Pay Extra for Limited Company Mortgages

In December, the firm announced that its own limited company buy-to-let mortgage would be priced at the same rate as its ordinary range.

The Commercial Director of FHL, Simon Bayley, believes that landlords should not be expected to pay extra due to a lack of choice, at a time when they face huge changes to their finances.

From April, mortgage interest tax relief for buy-to-let investors will be cut, along with a reduction in the Wear and Tear Allowance. However, those operating as limited companies will not be subject to the tax relief changes, leading to many landlords changing the way they run their lettings businesses.

Additionally, landlords and second homebuyers will be charged an extra 3% in Stamp Duty on property purchases.

Bayley expresses his concerns: “Certain lenders are charging up to 100bps extra for this product over their core range, when the risk is no different – effectively, asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.

“Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model. As soon as they realise that there are lenders, like FHL, who are not in the market to take short-term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear. It certainly will not win any friends among advisers and their landlord clients in the long term.”1 

How will the tax changes affect your business?

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