Posts with tag: mortgage interest tax relief

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Published On: October 5, 2017 at 9:59 am


Categories: Landlord News

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Mortgage interest tax relief changes, coupled with proposed rent controls, could trigger the next property crash, as landlords rush to sell-off their investments, warns a finance expert.

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Gary Heynes, a partner at tax and business advice firm RSM, believes that landlords could rush to put their properties on the market as the full effects of the reduction in mortgage interest tax relief, alongside Labour’s proposed rent controls, hit their profits.

He says that, as the tax relief changes are increasingly phased in, landlords could find themselves paying more in tax than the net rental income they receive.

If they cannot put rents up to cover the shortfall, Heynes claims that there would be a huge influx of properties put onto the market.

The amount of tax relief that landlords can claim on finance costs is already being cut. From 6th April 2017, tax relief is being restricted, with the full reduction due to be in place by 2020/21.

This tax year, 25% of landlords’ finance costs will receive tax relief at the basic rate of 20%. In the next tax year, this will rise to 50% and, by 2020/21, all finance costs will only get tax relief at the basic rate.

Heynes explains that someone with a £600,000 property paying an interest-only mortgage could find that, in the future, what is now a 4% annual return on investment would be replaced with a cost of £1,700 to run the property.

“Margins are getting tighter for landlords,” he says. “Add to this a possible increase in interest rates, and the issue is exacerbated.”

He expects many landlords to simply put rents up for their tenants in order to cover the shortfall.

“However, if a Labour government is elected, rent controls are almost certain to follow, so increasing rents might not be possible,” he explains. “Higher interest rates, coupled with rent controls, would not be a great environment for personal landlords and could instigate the great sell-off, as landlords look to reinvest elsewhere.”

Heynes adds: “This response could cause the next property crash, as the property market becomes over-supplied with assets to sell, pulling house prices down, impacting equity levels and mortgage agreements.”

Do you believe that Heynes’ predictions could become a reality?

Scrap Mortgage Interest Tax Relief Changes, RLA Urges Government

Published On: September 27, 2017 at 8:54 am


Categories: Finance News

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The best way for the Government to support the country’s small-scale landlords would be to scrap its controversial reduction to mortgage interest tax relief, insists the Residential Landlords Association (RLA).

The RLA has submitted requests to the Government ahead of the 2017 Autumn Budget on 22nd November 2017. We have the National Landlords Association’s recommendations here: /nla-recommendations-treasury-autumn/

Scrap Mortgage Interest Tax Relief Changes, RLA Urges Government

Scrap Mortgage Interest Tax Relief Changes, RLA Urges Government

The RLA’s main point of focus is that the Government should follow the lead of Ireland by scrapping the mortgage interest tax relief changes.

It is also calling for action on the mortgage lenders that prevent landlords from offering longer tenancies, which some renters want, and the introduction of a scheme allowing tenants with good payment histories to have them recognised by credit reference agencies.

But the submission isn’t all about problems; the RLA includes viable solutions.

It has put forward a number of proposals, including calls for the Government to introduce tax incentives for landlords that are willing to sell their properties to sitting tenants, those offering longer tenancies, and those investing in energy efficiency improvements.

The organisation believes that, where a landlord is prepared to sell their property to a sitting tenant, the 20% rate of Capital Gains Tax (CGT) should be applied, rather than the current 28%.

DJS Research findings for the RLA show that 77% of private landlords would consider selling their properties to tenants if the tax liability was waived.

The group would also like to see unused and abandoned plots of public sector land redeveloped as new sites for private rental sector homes, as all projections indicate that demand for rental housing will continue to grow, with predictions that 25% of all homes will be in the private rental sector by 2021.

But supply is a huge problem. And, although the Government has encouraged greater institutional investment in the private rental sector, evidence suggests that this will never be enough to meet the rising demand.

The RLA insists that the market will continue to be dominated by individuals and small firms letting a few properties – and these people need support.

It has been campaigning tirelessly for the reversal of the changes to mortgage interest tax relief since they were announced, with thousands of members either contacting or meeting their MPs to press home the devastating consequences of the plans on their tenants and businesses.

The Chairman of the RLA, Alan Ward, says: “RLA research shows many landlords have stopped investing in more properties as a result of recent tax changes, instead moving into short-term holiday lets or ceasing to rent to groups deemed high risk, such as the young and those on benefits.

“These decisions have far-reaching consequences for a country in the grip of a housing crisis, and we will do everything in our power to convince the Government that this unfair tax must be reversed.”

East Midlands landlords are being invited to a free event

Published On: September 15, 2017 at 9:51 am


Categories: Landlord News

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Landlords in the East Midlands are being invited to attend a free event, which is offering mortgage, tax and legislation advice.

This event is being provided by Kingswood Residential Investment Management, OCS Wealth Management and Wren Accountancy. It is to be held at the NBV Enterprise Centre on Tuesday 3rd October, with sessions taking place at 11am and 6pm.


These firms decided to join together to host the event, in response to concerns from their clients surrounding the changing landscape of property investment.

Paul Gayton of Wren Accountancy noted: ‘The event offers a unique opportunity to gain expert advice and insights into the property market. While landlords need to be given a briefing on the changes which are affecting their investment choices, the buy to let market in Nottinghamshire continues to provide potential and offer a wise investment option as part of a pension portfolio.’[1]

Adam Kingswood, owner of Kingswood Residential Investment Management, fears that the raft of legislation being implemented on the sector could drive reputable landlords out of the market. In addition, he is worried that that many more will deterred from entering.

East Midlands landlords are being invited to a free event

East Midlands landlords are being invited to a free event

He observed: ‘Being impacted at national level with stamp duty reforms and changes to landlord’s mortgage tax relief, through to the Nottingham City Council’s selective licensing at a local level, we see investors being constantly bombarded with information and it can be incredibly confusing.’

‘It’s our intention to use this briefing to help clients manage the changes by being well informed and prepared.’

You can access your tickets here.




Buy-to-Let Mortgage Tax Relief Changes: An Overview

Published On: September 4, 2017 at 8:10 am


Categories: Finance News

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By Dave Shelton, Senior Underwriter at Ipswich Building Society

As per the 2015 Summer Budget, landlords are at risk of running into financial struggles due to the chancellor’s decision to cut mortgage interest tax relief.

For many, the word tax is enough to induce a cold sweat, or a hot rage, but, with new rules being introduced in April 2017, taking three years to fully roll out, let investors across the whole of the UK should be clued up on what’s to come.

Buy-to-Let Mortgage Tax Relief Changes: An Overview

Buy-to-Let Mortgage Tax Relief Changes: An Overview

Note: This change pertains to landlords who own a property or properties in their own name only. If you own, or are thinking about owning property via a business or company, then these new rules do not apply to you.

What’s changing?

Rental income is no different to any other earned income in that it is taxable. Before these new tax relief changes came into play, landlords were able to deduct (or offset) interest payments (plus any other related costs) from their rental income before calculating tax owed. The changes mean that the amount of mortgage interest payments that can be offset against rental income is now to be gradually reduced. All landlords will be given a flat 20% mortgage tax credit instead, which will slightly reduce their tax bill, but will also mean they pay tax on buy-to-let income at the standard rate of 20%, or 40% for higher earners.

Although it sounds generous, with tax liability being reduced by a fifth due to the credit, the total amount that is taxable is actually a lot higher than it was before these changes came in. Landlords could therefore see the profit from their rentals reduced, and find that they now fall into a higher tax bracket as a result of their increased income, due to mortgage interest payments no longer being deductible from rental income.

Deductions at a glance

The percentage of mortgage interest that can be deducted from rental income before calculating tax liability is as follows:

2017 – 2018 = 75%

2018 – 2019 = 50%

2019 – 2020 = 25%

2020 – 2021 = 0%

Nothing can be said to be certain, except death and taxes

The new rules may seem off-putting, but, as they were first introduced in 2015, landlords have been given five years to come around to the idea and to make any adjustment to their finances accordingly.

New landlords will be mostly unaffected, as these changes can be calculated into the purchase of a property beforehand. Becoming a landlord can still be a profitable venture for those who are interested, but these new tax liabilities and potential costs must be factored into the equation.


More investors turning to commercial property investment

Published On: August 29, 2017 at 1:05 pm


Categories: Landlord News

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A rising number of investors are beginning to turn away from residential property and instead of looking to the commercial property market.

That is the view of James Emson, Managing Director of Clive Emson Auctioneers, who believes that investors are being deterred by recent tax hikes.

Commercial Investment

Mr Emson said that recent sales have been given a lift mainly by commercial investors, wit the phasing out of mortgage interest rate relief and introduction of 3% additional stamp duty taking their toll.

The most recent statistics from the firm show that national auction sales of commercial lots rose by 16% last month in comparison to the previous year. This has taken the total value raised to £190m.

More investors turning to commercial property investment

More investors turning to commercial property investment

Commenting on the results, Mr Emson said: ‘We are noticing a definite trend towards commercial property sales as investors seek to widen their portfolios. The increased popularity of commercial lots comes as continuing record low interest rates help boost the market while residential sales are not helped by interest rate relief and stamp duty changes.’[1]

In its most recent auction, Clive Emson sold property worth £15m and achieved a sale rate of over 70% from 139 lots.




Limited Company Landlords Face Higher Mortgage Costs

Published On: July 10, 2017 at 9:51 am


Categories: Finance News

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Limited company landlords face higher mortgage costs, so may not end up paying less in a bid to beat mortgage interest tax relief changes, warns broker Private Finance.

Lenders such as OneSavings Bank have reported increasing buy-to-let applications from limited companies, but research by Private Finance shows that any savings made by keeping mortgage interest tax relief may be exceeded by the higher costs of a mortgage deal for a limited company.

A limited company borrower can expect to pay 3.41% for a two-year fixed rate 75% loan-to-value (LTV) mortgage, compared with 1.91% for personal borrowers.

Mortgage application concept with house keys and calculator

Limited Company Landlords Face Higher Mortgage Costs

Analysis by the broker found that only landlords with multiple properties benefit from a limited company structure, with four properties being the tipping point.

Landlords looking to repurchase existing properties into a limited company are also likely to lose out, as this move triggers costly Capital Gains Tax (CGT) and Stamp Duty.

The research took a base salary of £35,000 and the average UK rental income of £11,010 from Zoopla to see what a landlord would owe on an average property worth £192,045.

Based on this scenario, a 75% LTV mortgage at 1.92% would cost a personal borrower £2,765 per year, while a limited company, at 3.41%, would pay £4,912.

The figures below show how savings are only made once tax relief can be claimed across four or more properties:

Two properties

Gross income (salary + rental income): £57,020

Annual mortgage interest costs: £5,531

Total tax bill: £10,902

Net income: £40,587

Three properties

Gross income: £68,030

Annual mortgage interest costs: £8,296

Total tax bill: £14,753

Net income: £44,981

Four properties

Gross income: £79,040

Annual mortgage interest costs: £11,062

Total tax bill: £18,604

Net income: £49,374

The Director of Private Finance, Shaun Church, says: “The option to invest through a limited company has come under the spotlight recently, as landlords look for ways to offset recent tax changes.

“But landlords shouldn’t rush into this assuming it’s a safe bet for saving money. Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing. Investors need to drive down mortgage costs as much as possible to prevent this from eating into their profits.”

He suggests: “Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing. Each investor is different and there’s no one-size-fits-all solution.”

Nevertheless, the latest study by Mortgages for Business shows that limited companies accounted for 77% of all applications for buy-to-let finance in the first quarter of 2017 and 78% in the second.