Posts with tag: mortgage interest tax relief

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

Published On: May 16, 2016 at 8:33 am

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Private landlords are likely to favour limited company buy-to-let in the future, believes Foundation Home Loans (FHL).

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

The mortgage lender has made the forecast as it signals a change to its rental calculation for individual buy-to-let applications. The company has joined other lenders in tightening its lending criteria in the buy-to-let sector.

Simon Bayley, the Commercial Director at FHL, claims that the advantages of limited company products will become clearer as the reduction in mortgage interest tax relief begins to bite.

As of April 2017, the amount of mortgage interest that landlords can claim against tax will be cut to the basic rate. However, those operating as a limited company will not be hit by the change.

“There is no doubt that with the new restrictions on tax relief which landlords can claim back, and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to buy-to-let at this point,” says Bayley.

“We have been delighted by the response to our limited company offering, which is priced at the same rate as our individual buy-to-let products. Intermediaries and their landlord clients are recognising the efficacy of a limited company option, and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.”

He continues: “As a responsible lender, we have heeded the regulator’s calls on affordability and stress testing, and are planning to change the basis of our rental calculation for individual applications from 125% to 145%, although it will not be implemented until mid-June when we make other LIBOR based changes. Limited company buy-to-let products remain unchanged at 125%.

“FHL supports the regulator’s intervention to enhance the way that individual landlords are protected by a more rigorous affordability system, but also recognise that experienced landlords are more than capable of assessing risks surrounding exposure to repayment of a loan in the event of rental shortfall.”

Are you thinking of forming a limited company?

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Published On: April 29, 2016 at 11:01 am

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Nationwide building society is updating its criteria for lending to buy-to-let landlords, ahead of changes to taxes for property investors.

Landlords who take out new loans from the society’s specialist arm The Mortgage Works (TMW) will only be able to borrow up to 75% loan-to-value (LTV), instead of the current 80%. They must also prove that their rental income is at least 145% of their monthly mortgage payments, up from the present requirement of 125%.

These changes were announced as landlords face a reduction in the amount of mortgage interest they can claim against tax, which will come into effect from April 2017. If you are concerned about how current and future tax changes will affect you, we have advice from finance expert Paul Mahoney, of Nova Financial: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Under the change, landlords that currently receive tax relief of 40% on their mortgage interest payments will see the amount cut to 20% over five years. Lenders have also been advised to consider the borrower’s costs associated with letting the property, including tax costs, when assessing affordability for loans.

Nationwide’s updated rules on rental income, coming into effect on 11th May, will mean that a landlord that makes £10,000 per year in rent will only be able to borrow £138,000, rather than £160,000.

Alternatively, if they wish to borrow up to £160,000 at 65% LTV, they must find a property that makes an extra £130 per month in rent.

The Managing Director of TMW, Paul Wootton, says the move is designed to help landlords strengthen their cashflow position “and help them withstand the impact of increased costs from the new tax regime”.

He adds: “As a responsible lender, this change is a pro-active move that recognises the need to help safeguard rental cover for landlords over the coming years, and in advance of the forthcoming changes to mortgage interest tax relief.”1 

The Director of Coreco mortgage brokers, Andrew Montlake, believes the change shows that lenders are starting to worry about how recent tax changes will affect landlords’ income in the future.

He says: “I suspect they will not be the last to change their rental calculations with this in mind, and landlords should review their portfolio and financing requirements sooner rather than later, as well as making sure they are aware of the very real effects these tax changes will have on their future income.

“The worry is that this will hit not just landlords, but tenants too in the form of higher rental payments, at a time when many are already stretched.”1

Other lenders have also been making changes to their lending criteria.

It is now almost a month since buy-to-let landlords and second homebuyers began being charged an extra 3% in Stamp Duty. The Association of Residential Letting Agents has expressed concerns that this is causing the level of rental property supply to decline.

1 http://www.theguardian.com/money/2016/apr/29/nationwide-tightens-lending-criteria-for-buy-to-let-landlords

Property Investors to Give Away £110,000 Flat in Anti-Osborne Protest

Published On: April 25, 2016 at 11:00 am

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Two property investors are set to give away a £110,000 flat in Manchester in a protest against Chancellor George Osborne and his tax attack on the buy-to-let sector.

Property Investors to Give Away £110,000 Flat in Anti-Osborne Protest

Property Investors to Give Away £110,000 Flat in Anti-Osborne Protest

Marco Robinson and Simon Paul – who describe themselves as multi-millionaires – are both opposed to the 3% Stamp Duty surcharge, which came into effect on 1st April, and the reduction in mortgage interest tax relief for buy-to-let landlords, which will come into force next year.

The pair believes that the tax changes will make it too expensive to invest in property and will cause a flood of property sales.

Despite many groups criticising the changes, recent research reveals that homeowners welcome the Stamp Duty surcharge: /homeowners-welcome-stamp-duty-surcharge-landlords/

The landlords are holding a competition to decide who will win the two-bedroom, fully furnished flat in central Manchester. The owner will also be guaranteed a rental income of £6,500 per year for five years. After that, the winner is free to handle the property as they please; it does not have a mortgage on it.

Robinson says: “George Osborne’s new Stamp Duty law is a blatant attempt to cash-in on a booming market. But it is badly thought out and utterly pointless. It is doing all it can to crush entrepreneurial activity in what is a fantastically rewarding sector.

“However, I don’t agree that it is the ultimate death knell of buy-to-let activity. That’s why I am giving away a rental market house. Ideally, I’d like to put a buy-to-let investor on the first rung of what is a fantastic and hugely rewarding ladder, which can lead to financial freedom.”1

Those wishing to enter the competition for the £110,000 property can play a game on Robinson’s Twitter page – @marcorobinson7. The draw will be made at the end of the year.

Will you be entering the draw?

1 http://financialfreedomguarantee.com/?utm_source=Twitter&utm_medium=competition&utm_campaign=Twitter_Competition

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Published On: April 18, 2016 at 9:02 am

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The two landlords fighting forthcoming tax changes in the buy-to-let sector have launched the second phase of their crowdfunding campaign to help them challenge the Government.

Steve Bolton and Chris Cooper have hired Cherie Blair’s law firm, Omnia Strategy, to tackle the Government’s plans to reduce the amount of mortgage interest that landlords can offset against tax. They have also announced an event in London to support the challenge.

The Judicial Review of Section 24 – Tenant Tax campaign aims to raise an additional £250,000 to fight the Government in court. The initial crowdfunding round raised £50,000 in just eight days.

On 9th June, the pair will hold the Tenant Tax Summit – Landlords Fight Back event at the ILEC Conference Centre in Earls Court. Confirmed speakers include Lord Howard Flight and representatives from Platinum Property Partners, SpareRoom.co.uk, Shawbrook Bank, Property 118 and Property Tribes.

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

The event will highlight the struggle of landlords and tenants, explaining how the new legislation will force many landlords to either sell their properties – therefore reducing the supply that the private rental sector needs – or raise their rents much higher – making renting even more unaffordable.

Bolton, the founder of Platinum Property Partners, and Cooper are calling on landlords, tenants, letting agents and others who will be affected by the new legislation to support their cause.

The campaign is now reopen for pledges via CrowdJustice (https://www.crowdjustice.co.uk/case/tenanttax/). It hopes to raise £250,000 to fight Section 24 of the Finance (No. 2) Act 2015.

Tickets for the London event are being offered to anyone who makes a minimum pledge of £100. Event costs are being covered by corporate sponsors, partners and patrons.

In February, the pair submitted a full application for a judicial review, and an Acknowledgement of Service was received from HM Revenue & Customs and the Treasury.

From April 2017, the amount of mortgage interest relief that can be offset against tax will be reduced to the basic rate for buy-to-let landlords. Those operating as limited companies will not be hit by the tax change, thus causing many landlords to consider setting up their business this way.

Bolton explains the importance of the campaign: “The days where nobody loves a landlord must come to an end. We need to unite to show that we will not accept the victimisation of landlords and tenants by the out of touch political elite. They are deluded if they believe that they will go unchallenged when trying to reclassify mortgage interest as anything other than a normal business expense.

“The tenant tax is wrong on every level, and if we allow a normal business expense to become a taxable expense for landlords, who will be next: Corporate landlords? Shopkeepers? Small business owners? Anyone who has used finance to help expand their business?”

He continues: “We aim to make the Tenant Tax Summit a very enjoyable, inspiring, interactive, uplifting, informative, educational and motivational day. It is a unique chance for our grassroots supporters to come together, support each other, share ideas and shout from the rooftops. We want to show politicians, the media and the country at large that we truly are a force to be reckoned with.”1 

Support the cause on Facebook: https://www.facebook.com/clause24/?fref=nf

 

 

 

Should Landlords Form Limited Companies to Avoid Tax Changes?

Published On: April 15, 2016 at 11:02 am

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Landlords should weigh up the costs of setting up a limited company in order to avoid tax changes, advises the Managing Director of the Association of Residential Letting Agents (ARLA), David Cox.

Speaking at the ARLA conference earlier this week, Cox told landlords to consider whether the costs of incorporating will create savings compared with the reduction in buy-to-let mortgage interest tax relief and higher Stamp Duty rates.

Should Landlords Form Limited Companies to Avoid Tax Changes?

Should Landlords Form Limited Companies to Avoid Tax Changes?

From April 2017, the amount of mortgage interest that can be offset against tax will be cut for landlords, while buy-to-let investors and second home buyers have been subject to a 3% Stamp Duty surcharge from 1st April.

Finance expert Paul Mahoney, of Nova Financial, has advice on how these changes will affect you: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

At the conference, Cox claimed: “Landlords will make losses. They have to do the maths to see if incorporating would make them better off.”

Those operating as limited companies will be exempt from the mortgage interest tax relief reduction, however, large-scale investors are still subject to the higher rate of Stamp Duty, as confirmed in the Budget 2016.

Cox believes that there is still a great need for letting agents, as the private rental sector is constantly undergoing changes to regulation and legislation.

The conference focused on whether institutional investment in buy-to-let will threaten smaller landlords.

“There is a big shortage of housing stock,” stated Cox. “Even if institutional landlords build 100,000 a year extra, we would still be 150,000 short.”

He insisted: “There will always be a role for private landlords.”1

Cox expects a flood of rental properties to go onto the market in the second quarter of this year, as landlords rushed to purchase further investments ahead of the Stamp Duty change.

However, he predicts that the market will get quieter in the second half of the year, as landlords struggle to accommodate the financial changes. This forecast arrives as the Royal Institution of Chartered Surveyors says that it expects house prices and sales to fall in the coming months.

Remember to keep up to date with the goings on of the property market and buy-to-let sector at LandlordNews.co.uk.

1 http://www.propertyindustryeye.com/26801-2/

HMRC and Treasury Respond to Landlords’ Challenge of Tax Changes

Published On: March 24, 2016 at 12:01 pm

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HM Revenue & Customs (HMRC) and the Treasury have responded to the legal team representing two landlords challenging forthcoming buy-to-let tax changes. However, the comments cannot be made public.

HMRC and Treasury Respond to Landlords' Challenge of Tax Changes

HMRC and Treasury Respond to Landlords’ Challenge of Tax Changes

Back in January, we reported that Steve Bolton and Chris Cooper are calling for a judicial review of section 24 of the Finance (No. 2) Act 2015, which includes the planned reduction in buy-to-let mortgage interest tax relief.

Chancellor George Osborne announced the proposal in the summer Budget 2015.

Bolton and Cooper described the announcement as ending “a long-established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits”.

The two landlords previously expected the response to their legal challenge to arrive by 16th March.

Now, they can confirm that the two Government departments have responded with an Acknowledgement of Service, which sets out the grounds on which the departments intend to contest the application for a judicial review.

On the campaign’s Facebook page, the landlords state: “We have received a reply from HMRC and HM Treasury. We now need to speak with our lawyers before issuing any form of statement to ensure that our case is not prejudiced in any way. Sorry we can’t share more at this stage, but it is critical we take legal advice and ensure we follow the correct protocols.”1

The landlords previously expected the response to be aggressive, but they cannot confirm whether this is the case.

Omnia Strategy LLP, the firm led by Cherie Blair QC, represents the landlords.

1 https://www.facebook.com/clause24/?fref=nf