Posts with tag: landlord tax relief

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

Published On: December 3, 2015 at 11:23 am


Categories: Finance News

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Barclays is the first major mortgage provider to tighten its criteria for buy-to-let lending.

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

The bank announced that from 7th December, its rental cover ratio will rise from 125% to 135% for all new applications. This decision was made after the summer Budget revealed that buy-to-let mortgage interest tax relief will be cut from 2017. Landlords are expected to incur higher costs as a result.

It is believed that Barclays’ change in criteria could spread out into the market, with other lenders adopting the same rules.

From Monday, all new buy-to-let applicants must prove that they can cover the mortgage payments by 135% of rent.

All existing buy-to-let and permission-to-let mortgages will continue to be assessed at 125% as part of the overall affordability calculation and the affordability rate will stay at 5.79%.

In July, Chancellor George Osborne announced that tax relief for landlords will be gradually reduced to the basic rate from April 2017.

In a statement from Barclays to intermediaries, the bank said that the increase in rental cover ratio will ensure new customers are protected in the long-term.

Chief Executive of mortgage broker SPF Private Clients, Mark Harris, believes the bank is likely to be the first of many lenders to make this change to their buy-to-let criteria.

He adds that the industry is coming to a point where buy-to-let will become a 50% loan-to-value (LTV) product in the South East and London at least, putting a small-scale investor into the same category as a large landlord.

He says: “This means that if you are going to invest in property, you won’t be leveraged at 85% LTV, for example, which was commonplace during the boom, but will need to find a lot more equity.”

He also states that when investors are hit by the higher rates of Stamp Duty from April, smaller landlords will be dropped in favour of wealthier investors. Find out more about the changes in Stamp Duty here: /btl-homes-hit-with-increased-stamp-duty/

“These developments are not good news for tenants, as landlords will inevitably push up rents if they can to cover some of their higher costs and removal of some tax breaks,”1 Harris concludes.

The Bank of England has also announced that it is ready to cool the buy-to-let market. Read more: /bank-of-england-stress-tests-results-revealed/


Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Property Partner has launched a buy-to-let calculator for landlords to work out the potential impact of the reduction in mortgage interest tax relief on their income.

The property crowdfunding platform has introduced the calculator ahead of the changes, which will be phased in from April 2017.

Thousands of buy-to-let landlords will see a significant dip in their rental income when the maximum level of tax relief that can be claimed on buy-to-let mortgage interest drops from the current rate of 45% to the basic rate of 20%.

The cut is designed to create a balance between landlords and first time buyers, as well as raising billions of pounds in revenue for the Treasury. However, landlords in the UK are already taxed much more heavily than those in Germany, France and the USA.

Experts believe that the reduction could cause serious changes in the private rental sector, further limiting the supply of rental accommodation and subsequently pushing rent prices higher.

The Property Partner calculator will help landlords understand the impact of the changes. Landlords put into the calculator whether they are a basic rate taxpayer (20%), a higher rate taxpayer (40%) or an additional rate taxpayer (45%).

They then put in how much their bought their property or properties for, their total rental income per year, how much is left on their mortgage(s) and what interest rate they are paying. The resulting prediction indicates how much more worse off higher rate taxpayers will be once the cuts are fully implemented.

CEO of Property Partner, Dan Gandesha, comments: “Landlords were hit with a shock new tax in the summer Budget when the Chancellor announced that mortgage tax relief would be cut.

“Our buy-to-let calculator allows you to quickly and easily work out whether it’s still worth holding onto your property or not, and what other alternatives are available.”1 



















RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

Published On: October 12, 2015 at 2:16 pm


Categories: Landlord News

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The Residential Landlords Association (RLA) has called for buy-to-let investors to be given tax relief if they sell their properties to first time buyers.

Chairman of the RLA, Alan Ward, says the proposal follows David Cameron’s speech at the Conservative Party conference last week, which focused on a rise in homeownership. However, he adds that the plan would give landlords “a way out of the market”.

RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

He says: “With tax changes coming up that will severely impact on their incomes, a number of landlords will be looking to quit.

“A second group of landlords looking for a way out could be older ones, who may have held onto their properties for a very long time, and who now want to retire or who need the money for other things.”

Despite lobbying by the RLA, Ward reports that there is no sign of Chancellor George Osborne backing down on the tax changes announced in the summer Budget.

The plans will gradually remove the ability for landlords to offset mortgage interest from their rental income, with tax relief to be cut to the basic rate.

According to the RLA, this will mean that some landlords will pay tax on a loss.

However, it adds that landlords will also be hit by tax if they try to sell their properties now.

Capital Gains Tax (CGT), which landlords pay when they sell, is generally set at the higher rate of 28%.

It means that if a landlord purchased a property for £250,000 in 2005 and sold now, the CGT bill would be a huge £63,000.

Contrastingly, owner-occupiers do not pay any CGT.

After surveying landlords, Ward reports: “Selling to first time buyers or sitting tenants would be attractive to more than three-quarters of landlords, given the right tax environment.

“David Cameron’s speech lacked detail as to how landlords could be encouraged to sell and tenants to buy.”

The plan to let landlords off paying CGT if they sell to first time buyers was first announced in the RLA’s pre-election manifesto, which was released at the start of the year. It was aimed at all political parties in the run-up to the general election. The RLA also called for CGT relief when a landlord sells one rental property, but reinvests the funds in another.

Ward explains: “No other business that wants to reinvest would be penalised in this way.

“We also have to accept that markets change. For example, an area in south Manchester was popular with landlords investing in student property.

“Now that the [Manchester Metropolitan] university has moved its campus, those landlords could be usefully encouraged to sell up and reinvest, for example in city centre apartments.”1

Find out more about what was said at the Conservative conference: /prime-minister-to-promise-200000-starter-homes/


Tax Changes to Hit Six in Ten Landlords

Published On: September 23, 2015 at 12:31 pm


Categories: Landlord News

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Six in ten private landlords say that the tax change announced in the summer Budget will force them to pay higher rates of income tax, rather than the basic rate.

Now, industry experts are warning that many landlords could leave the sector.

Tax Changes to Hit Six in Ten Landlords

Tax Changes to Hit Six in Ten Landlords

In the summer Budget, Chancellor George Osborne said that from 2020, mortgage interest relief for private landlords would be cut to the basic rate of income tax. This will be applied to turnover, not profit.

The Residential Landlords Association (RLA) points out that this means many landlords will face paying higher rates of income tax, despite their income not increasing.

In a survey of around 1,200 landlords, of those paying the basic rate of income tax, more than 60% stated that the changes would push them into either the higher or additional rate of tax.

The RLA has met with the Treasury to raise its concerns over the impact of the mortgage interest changes, insisting that it will affect landlords’ ability to invest in much-needed housing.

Policy Director at the RLA, David Smith, says: “The findings of our survey are deeply concerning. Many landlords currently paying the basic rate of income tax face the prospect of a nasty surprise when they meet with their accountants.

“Having felt that they were not affected by the Budget measures, many will seriously consider whether it is worth continuing in the market when faced with this tax bombshell.

“It cannot be right that many landlords face seeing their income tax increase without an increase in their income.

“All the evidence shows that we need more, not less, rented housing. With almost 90% of landlords being individuals renting out just a handful of properties each, it is only by supporting this group that we will boost the supply of homes to rent.”

Smith adds: “The Budget announcements risk undermining the potential for growth.

“Even at this late stage we are calling on the Government to pause and provide more time to assess the impact on market.”1


Government to Push Through with Landlord Tax Changes

Published On: August 28, 2015 at 9:47 am


Categories: Finance News

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The Say No to George petition that demands the Government to reverse its plans to cut mortgage interest tax relief for private landlords has received a response.

After attracting over 20,600 signatures, the Government has replied. If the petition gains 100,000 signatures, the Government must consider the matter for debate in Parliament.

Government to Push Through with Landlord Tax Changes

Government to Push Through with Landlord Tax Changes

The official response from the Treasury states: “The Government is committed to a fair tax system so is restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.

“Landlords are currently able to offset their mortgage interest and other finance costs against their property income, reducing their tax liability. This relief is not available for ordinary homebuyers and not available to those investing in other assets, such as shares.

“Currently, the landlords with the largest incomes benefit the most, receiving relief at their marginal tax rates of 40% or 45%.

“By restricting finance cost relief available to the basic rate of income tax (20%), all finance costs incurred by individual landlords will be treated the same by the tax system.

“This recognises the benefits to the economy that investment in property can bring, but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.

“By unifying the treatment of finance costs for all individual landlords, the Government is reducing the distortion between property investment and investment in other assets, and reducing the advantage landlords may have in the property market over ordinary homebuyers.

“Less than one in five (18%) of individual landlords are expected to pay more tax as a result of this measure.

“Taking account of the other measures from the summer Budget, the Office of Budget Responsibility (OBR) has not adjusted their forecast for house prices. The OBR expects the impact on the housing market will be small.

“Furthermore, this change is being introduced gradually from April 2017 over four years. This will give landlords time to plan for and adjust to these changes.”1

The petition can be found here:


Landlords and Agents Urged to Suggest New Tax Relief Ideas

Landlords and letting agents have been urged to offer their ideas for a new tax relief system, after unpopular plans to cut mortgage interest relief were revealed in the summer Budget.

Chancellor George Osborne announced that landlords’ mortgage interest relief would be reduced to the basic rate of tax. This is set to be phased in between April 2017 and April 2020.

The Residential Landlords Association (RLA) believes that this would mean a landlord with a £150,000 buy-to-let mortgage for a property worth £200,000 would see their profit drop from around £2,160 per year to just £960.

Landlords and Agents Urged to Suggest New Tax Relief Ideas

Landlords and Agents Urged to Suggest New Tax Relief Ideas

This caused fears that landlords may stop using letting agents and increase rents as a result.

And David Smith, Policy Director at the RLA, has revealed that following a meeting with Treasury officials, the Government will be sticking by its plans.

However, he said that the RLA was asked to propose other tax solutions to the Treasury.

He explains: “The general feeling we are getting is that a U-turn is very unlikely, but that doesn’t mean we cannot push for it and we will do that.

“There is light at the end of the tunnel, but it may not be the same tunnel. I do not think he is going to draw back but I think there is the chance that a new relief could be produced, which could be good for the industry as a whole.”

The RLA is now calling on landlords and letting agents to suggest their own ideas for a new tax relief system.

It asks: “If you have alternative ideas on tax relief, then we would be happy to hear them, particularly if you can provide reasons other than just ‘it will save the landlord money’.

“For instance, allowing energy efficiency improvements to be written off against income as opposed to capital improvements will encourage landlords to invest in energy efficient measures.”1

Additionally, Smith has denied that a petition on the website is failing. The petition had over 10,000 signatures last week, but has only gained 4,000 more since.

He adds: “10,000 was our first target and the next target is 100,000. I do not think that is a bad number, but people do have other things to do in August. We will continue to support it and are sure it will pick up into September.”1

The RLA will inform the Treasury of any proposals that it receives next month.

Landlords and letting agents are advised to email their ideas to:

The RLA also has a tax campaign webpage, where landlords and agents can write to their MP: