Posts with tag: mortgage interest tax relief

Landlords Seeking Advice Ahead of Tax Changes

Published On: March 22, 2016 at 1:01 pm

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A recent study by the Nottingham Building Society reveals that residential landlords have driven a surge in advice enquiries ahead of forthcoming buy-to-let tax changes.

The coming changes are boosting business for mortgage brokers, as landlords seek advice on improving existing mortgage deals and expanding their portfolios.

Over a third (35%) of brokers reported that they have experienced an increase in enquiries from existing landlords, with 42% receiving enquiries about remortgaging and 31% saying

Landlords Seeking Advice Ahead of Tax Changes

Landlords Seeking Advice Ahead of Tax Changes

landlords are considering expanding their portfolios.

Landlords face two major changes to their finances in the coming months: Firstly, the 3% Stamp Duty surcharge will be implemented on 1st April, which has caused a rush of landlords to purchase additional properties before being faced with the charge.

Secondly, landlords’ ability to offset their buy-to-let mortgage interest payments against tax will be phased out from 2017, which is forcing others to sell.

Despite concerns that landlords will sell their rental properties and leave the buy-to-let sector, The Nottingham’s research indicates that just one in five (19%) existing landlords plan to sell some or all of their portfolios in response to the tax changes.

The Senior Mortgage Broking Manager at Nottingham Mortgage Services, Ian Gibbons, comments: “The tax changes and Stamp Duty increase have complicated the calculations for would-be buy-to-let investors, but there remains strong interest in investing in the sector.

“It is striking that one in five landlords are planning to sell some or all of their properties, but people need to think carefully before rushing into decisions driven by tax changes.”

He adds: “Brokers we speak to are seeing a wide range of enquiries from customers that are not focused simply on selling, but also on remortgaging and ensuring they have the most competitive deal.”1 

The Nottingham’s study shows that landlords in London are the most likely to sell some of their properties, while those in the North East are the least likely.

For more information about how the Budget 2016 will affect landlords, read this interesting piece from Nova Financial’s Paul Mahoney: /budget-reasonably-positive-believes-finance-expert/

1 http://www.propertyreporter.co.uk/landlords/surge-in-btl-advice-seen-ahead-of-stamp-duty-changes.html

 

Over Half of Landlords Postponing Property Investment

Published On: March 15, 2016 at 12:10 pm

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It’s just over two weeks until the 3% Stamp Duty surcharge on buy-to-let properties and second homes is enforced, causing many residential landlords to postpone further property investment.

Property Partner, a crowdfunding platform, has found that over half (59%) of landlords are halting their plans to make additional investments in traditional buy-to-lets, while some are selling their existing properties.

Over Half of Landlords Postponing Property Investment

Over Half of Landlords Postponing Property Investment

Recently, we revealed that in the past six months, the number of landlords in London looking to sell their properties has quadrupled.

Worryingly, many landlords are still unaware of the full impact that forthcoming Government measures are expected to have on their lettings businesses.

On 21st March, stricter lending criteria on buy-to-let mortgages will be implemented. The rules could particularly affect accidental landlords.

Soon after, the additional Stamp Duty charge will be brought in, and from April 2017, mortgage interest tax relief available to buy-to-let landlords will be reduced to the basic rate.

However, Property Partner found that 27% of landlords had little or no awareness of the huge changes that will soon hit their finances.

The CEO of Property Partner, Dan Gandesha, says: “On the evidence of our research, landlords are deeply divided over how to respond to the Government’s clampdown on buy-to-let.

“A significant minority is desperately buying up available stock to beat the April Stamp Duty deadline, causing a surge in prices. Do these people really understand how the Government’s tax changes will impact their profits?”

He adds: “Luckily, the majority of landlords are taking a much more cautious view, with many choosing Property Partner as a better way to access residential property investment, without the hassle, expense or tax implications.”1

If you are unsure of how the forthcoming changes will affect your property investments, this useful guide from a leading financial expert will help: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

1 https://www.landlordtoday.co.uk/breaking-news/2016/3/more-than-half-of-landlord-halting-portfolio-investment-plans

Number of Landlords Looking to Sell Quadruples in Six Months

Published On: March 11, 2016 at 9:35 am

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The number of residential landlords in central London who are looking to sell their rental properties has quadrupled since last year’s Budget, according to new data from the National Landlords Association (NLA).

Number of Landlords Looking to Sell Quadruples in Six Months

Number of Landlords Looking to Sell Quadruples in Six Months

When surveyed before last year’s Budget, just 4% of private landlords had plans to sell property. However, the proportion has almost quadrupled, rising to 19% when surveyed in January this year.

The 15% growth in intention to sell rental property is the highest seen across the UK in the past six months.

The smallest increase in intention to sell was from residential landlords in the North East, rising from 17% in June last year to 24% in January – up by just 7%.

The reduction in mortgage interest tax relief for individual residential landlords – announced in last year’s Budget – will leave many landlords making losses, forcing some basic rate tax payers into a higher tax bracket, and leaving higher and additional-rate tax payers with significantly higher tax bills.

The NLA has named the change the Turnover Tax, as landlords’ tax will be calculated on the rental income they receive, rather than their profits.

The CEO of the NLA, Richard Lambert, says: “Local property markets vary greatly across the United Kingdom, but we are seeing a loss of confidence across the board as many landlords realise they won’t be able to remain in the market.

“If landlords follow through with their intentions over the coming months, this could lead to a massive sale of property, as we have previously warned. However, this may not be a straightforward process, especially for those with stock in low demand areas.”

He adds: “We urge those considering selling up to think about when they will need to do so, and to plan ahead now in order to minimise the risk of losing money as a result of a failure to sell.”1 

How many landlords plan to sell around the UK?

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Are you planning on leaving the private rental sector or reducing your portfolio due to the tax changes?

For more advice for landlords on how the changes will affect you, this piece by a leading finance expert will help you understand the impact: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

1 http://www.landlords.org.uk/news-campaigns/news/proportion-london-landlords-looking-sell-quadrupled-in-last-six-months

Landlords’ Challenge of Tax Relief Reduction to Receive Response from HMRC

Published On: March 8, 2016 at 12:38 pm

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Two landlords’ legal challenge of Clause 24 of the Finance (No. 2) Act 2015 will receive a response from HM Revenue & Customs (HMRC) by 16th March 2016.

Under the clause, landlords will not be able to deduct the cost of their buy-to-let mortgage interest as a business expense from their rental income by 2020. This will mean that their rental income will be added to any other income, potentially pushing them into the next tax band.

Therefore, tax will be paid on turnover, not profit, meaning that tax could be due on non-existent income. For some higher-rate taxpayers, mortgage costs above 75% of their rental income will mean they make a loss on their buy-to-let investment.

Landlords' Challenge of Tax Relief Reduction to Receive Response from HMRC

Landlords’ Challenge of Tax Relief Reduction to Receive Response from HMRC

The clause, announced by Chancellor George Osborne in the 2015 Budget, has received criticism from buy-to-let landlords, who have often invested in property to boost their pension pots.

The measure is part of the Government’s plan to turn generation rent into generation buy. Meanwhile, some believe that the Government is favouring large-scale investors over smaller private landlords.

Landlords Steve Bolton and Chris Cooper are leading a legal challenge in an attempt to bring a judicial review of the reduction in mortgage interest tax relief, which will be gradually imposed starting in 2017.

Cooper is a modest investor and part-time landlord, who is boosting his pension through buy-to-let, while Bolton owns around 20 residential and commercial properties, and is also the founder and owner of Platinum Property Partners, a buy-to-let training franchise.

Cherie Blair’s Omnia Strategy has been appointed to represent the landlords.

The application has been filed and signed off by the firm, which gives HMRC and the Treasury until 16th March to respond with an Acknowledgement of Service. This must detail the grounds on which the departments intend to contest the challenge.

The challenge will argue that the Government’s tax change flouts “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 landlords have set up a crowdfunding page, which had raised just over £50,000 from 740 supporters in January.

A statement from the landlords says: “We expect the Government to respond aggressively. We are hoping for a positive result, but are mindful both that judicial review proceedings are inherently difficult and also that, even if we win, the Government might introduce changes or new measures that are more defensible legally, but still unattractive and problematic for hard-working private landlords.”1

We will keep you updated on the landlords’ case and continue to provide information for landlords on all issues affecting the buy-to-let sector.

1 https://www.facebook.com/clause24/posts/1107773035932366

30% of All Households to Rent from Private Landlords in 30 Years

Published On: March 2, 2016 at 9:37 am

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The private rental sector will continue to grow over the next 30 years, leading to 30% of all households renting from private landlords, according to the latest prediction from franchise estate and letting agent firm Martin & Co.

This forecast was announced in a breakfast briefing yesterday, held to acknowledge the 30 years since Martin & Co let its first property.

The company’s CEO, Ian Wilson, stated that forthcoming changes to landlord taxes and Stamp Duty for buy-to-let investors will not stop landlords making profits.

30% of All Households to Rent from Private Landlords in 30 Years

30% of All Households to Rent from Private Landlords in 30 Years

He claimed that the gradual reduction in mortgage interest tax relief on buy-to-let property loans will not affect many landlords.

He said: “A current income after tax of £1,789 per annum would fall to £894 if rents remain unchanged. However, a 5% per annum increase in rents would take income – after tax – to £1,858 per annum in 2020.”1

Speaking of the more imminent Stamp Duty surcharge, Wilson commented that it is possible that landlords will leave the sector, leading to lower rental property stock levels.

However, he thinks that this will push rent prices up, making monthly yields more attractive to existing landlords, while encouraging investors to return to the buy-to-let market.

As of 1st April, buy-to-let landlords and second homebuyers will be charged an extra 3% in Stamp Duty on properties costing £40,000 or more. The change has led to many investors rushing to buy before the surcharge is implemented.

The Managing Director of Martin & Co, Michael Stoop, also expects the sector to adapt in order to provide private rental accommodation for the rise in larger families who must rent their homes.

He said that landlords would diversify their portfolios by purchasing larger properties in less affluent areas, such as three and four-bedroom houses with gardens.

The firm told those at yesterday’s briefing that as a group, it manages 45,000 rental properties – equivalent to the size of Winchester.

Martin & Co has around 300 offices, trading under five different brands.

How do you expect the changes to landlord finances and the expanding private rental sector to affect how you invest in the market?

We will continue providing information for landlords on all issues that may affect their lettings businesses.

1 http://www.propertyindustryeye.com/private-tenants-to-grow-to-30-of-all-british-households/

 

Buy-to-Let Will be Unprofitable in Most Areas if Interest Rates Rise

Published On: March 1, 2016 at 12:49 pm

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Investing in traditional buy-to-let could become unprofitable in seven out of ten UK towns and cities if interest rates rise by 2.5% over the next four years, according to a new study.

Buy-to-Let Will be Unprofitable in Most Areas if Interest Rates Rise

Buy-to-Let Will be Unprofitable in Most Areas if Interest Rates Rise

Property Partner has analysed over 100 of the largest towns and cities in the UK to consider what impact an interest rate rise, alongside the forthcoming changes to mortgage interest tax relief, could have on local buy-to-let markets.

The research covers the next four years to 2020, when buy-to-let landlords will have lost the ability to claim the higher rate of tax relief on their buy-to-let mortgage interest payments.

The research took an average property, rented out at a price typical of the area in each town or city covered. It assumed that the property was mortgaged with a 60% loan-to-value buy-to-let loan, at a fixed rate of 3% for three years.

In the country as a whole, the average annual net profit on this property would be £3,419 today, but would drop to £2,555 by 2020, even if rates remained at 3%. This decrease in profit would be down to the phasing out of mortgage interest tax relief.

The study paints a worse picture if interest rates were to rise by 2.5% by 2020, with the same property making a loss in more than two-thirds of towns and cities, with an average loss of £325 per year.

In Salisbury, Property Partner found that buy-to-let landlords, currently making an average annual profit of £2,200, would be in debt of £2,984 a year with a combined interest rate rise and reduction in mortgage interest tax relief.

However, economic analysts believe that interest rates might not rise until at least 2020.

The gradual phasing out of buy-to-let mortgage interest tax relief will begin in 2017.

For the upcoming changes to the buy-to-let sector, read this interesting piece by Nova Financial’s Paul Mahoney, who insists that buy-to-let “is not dead”: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/