Posts with tag: mortgage interest tax relief

More landlords understand mortgage interest tax relief changes

Published On: April 10, 2017 at 8:54 am

Tags: buy-to-let mortgage,landlords,mortgage interest tax relief,tax relief

The most recent report from Paragon Mortgages reveals that more landlords are beginning to come to terms with the implications of the Government’s changes to tax relief.

A reduction in buy-to-let mortgage interest tax relief began being phased in from last Thursday (April 6^th). Paragon’s survey revealed that 78% of landlords recorded a good understanding of the personal implications of the changes. This was a rise from the 71% seen in the final quarter of 2016.

Understanding

This rise in understanding was coupled with a smaller percentage of landlords noting that they not understand the changes (7%). In addition, those saying they required more information fell from 18% to 13%.

Pleasingly, landlord optimism also remained stable in the first quarter of 2017. This shows that confidence could be returning amongst landlords following a pretty turbulent few months. Their greater understanding of pressures likely to impact on them and subsequent strategies are lessening the impact.

More landlords understand mortgage interest tax relief changes

Encouraging

John Heron, Managing Director of Paragon Mortgages, said: ‘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.’[1]

‘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,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/landlords-brace-themselves-as-tax-relief-changes-begin.html

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

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

Author: Em Morley

Categories: Landlord News

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.

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.

BTL product numbers for limited companies see substantial rise

Published On: April 4, 2017 at 1:11 pm

Author: Em Morley

Categories: Finance News

Tags: landlords,limited companies,limited company borrowers,mortgage interest tax relief

The most recent analysis from Mortgages for Business shows that Q1 of 2017, the average of products available to limited company borrowers rose by over a third.

This figure now stands at 266, with data indicating that the range and price of buy-to-let mortgages for limited companies is at record highs.

Choices

Lenders are now offering record choice to limited company borrowers, with limited company rates also increasing. The average three-year fix is now only 0.5% higher than similar products on the wider market.

Demand from investors show little sign of slowing. As limited company borrowers fall outside the jurisdictions of changes to mortgage interest tax relief changes, more investors are choosing to incorporate.

In Q1 2017, 77% of the total buy-to-let purchase applications are being made via a corporate engine, which again is a record high. This is in comparison to 69% of applications in Q4 of 2016 and only 21% before the 2015 Summer Budget, when the tax changes were announced.

BTL product numbers for limited companies see substantial rise

Appeal

David Whittaker, CEO of Mortgages for Business, observed: ‘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.’[1]

The remortgage market has also seen a significant change in the opening quarter of the year. Data from Mortgages for Business shows that completions for limited company remortgages hit 30% of remortgage completions in Q1, up from 15% in Q4.

[1] http://www.propertyreporter.co.uk/business/ltd-co-btl-product-numbers-see-significant-boost.html