The Changes For Landlords In 2016/2017
Date Published 09 December 2016
What a year!
This year the lettings industry has been unfairly targeted with the government announcing a number changes to legislation bringing tax implications for landlords which will unfortunately effect revenue. Below are just a few of the current issues effecting landlords and property market. They will not necessarily effect everyone but they are certainly worth considering. As your local lettings expert I am happy to discuss with you in more detail how this will make a difference to you
Section 24 Tax relief for mortgage interest payments;
The amount of tax relief that can be claimed by Landlord's on their mortgage interest payments is set to reduce from 45% to the basic rate tax rate of 20%. This is due to be phased in over a period of 4 years from April 2017. It starts with 75% of costs deductable from income 2017, 50% from April 2018, 25% from April 2019 and 0% from April 2020. At the same time the percentage of basic rate tax reduction will also increase starting April 2017 to 25%, 50% in April 2018 , 75% in 2019 and 100% in 2020. Pushing a lot of smaller landlords with one or two properties into the higher tax band.
The changes will:
• affect you if you let residential properties as an individual, or in a partnership or trust
• change how you receive relief for mortgage interest and other finance costs
• be gradually introduced over 4 years from April 2017
Finance costs won't be taken into account to work out taxable property profits. Instead, once the Income Tax on property profits and any other income sources has been assessed, your Income Tax liability will be reduced by a basic rate ‘tax reduction'. For most landlords, this will be the basic rate value of the finance costs.
All residential landlords with finance costs will be affected, although not everyone will pay more tax.
Those unaffected:
• UK resident company
• Non UK resident companies
• Landlords of furnished holiday lets
Everyone's tax situation will be different, we advise speaking to your accountant to see how this will impact you personally or again give me a call in the office on 01752 206040 I will be able to answer any questions you may have.
BTL mortgages - stress testing
For new and remortgage Buy To Let (BTL) products lenders are tightening their criteria with regards to affordability and being able to stress-test income from properties to ensure that the Landlord is able to cover the repayments with the income received from the property. The stress testing applied varies by lender and we recommend you seek professional financial advice.
We have recently had Tricia Kennedy from Mortgages 4 Plymouth in the office to run through BTL mortgages with us. She is currently offering a free of charge review on your lending requirements and we will happily put you in touch with her to ensure you are not overpaying on your borrowing. With current mortgage rates starting under 1% and some great interest only options now is a fantastic time to review this.
Autumn Statement;
Just recently in the Autumn Statement it was announced that the government were looking to introduce an outright ban on letting agency fees to tenants. As there was no details of how this was to be implemented and what they classify as fees for tenants we eagerly await further clarification of this from the government. There will be a period of consultation in the new year with the industry expected to make sure the knock on effect to landlords and agents is minimised. There has been a lot of talk about rents increasing as the costs are passed onto landlord. If you have any concerns or would like to talk through how this may affect you please call me on 01752 206040.
Stamp Duty;
As from the 1st April 2016 the government introduced a new surcharge for anyone who buys an additional property, e.g. second home or investment property. The stamp duty rate for these properties are an additional 3% on top of the standard stamp duty rate. This new rate also applies if you own a property abroad and you are buying your first property in the UK.
For example, if you are buying an additional property with a purchase price of £300,000, just the extra 3% Stamp Duty would equate to £9,000 (3% of the entire price). This is in addition to the £5,000 regular Stamp Duty bill on a property of this value, bringing the total payable to £14,000.
Novahomes Lettings are able to take the stress out of the process of investing and letting out your property. We offer a very personal and individually tailored service. We are happy to talk with you and offer a free of charge, no obligation rental appraisal on your property. Whether you are just starting out on your journey and buying your first property, or whether you have a portfolio of properties managed privately or through another agent we will be able to help and are certain we can offer great suggestions for gaining the best return on your investment .
