Landlords face tough clampdown from April

February 3, 2016 by Brendan O'Neill

Landlords

From April 2016, landlords will face further challenges, as the tax clampdown introduced by George Osborne comes into force.

Landlords will face paying extra stamp duty on properties, and will also be affected by new tax relief cuts. In addition, a report in the Financial Times indicated that the Bank of England may be given new powers to curb lending to those in the buy-to-let sector. These changes may include new restrictions for lenders, or the introduction of tough affordability tests for the buy-to-let sector.

The changes come as the Bank of England’s financial stability paper, released in December, cited the buy-to-let sector as being a significant risk to the UK economy. According to the report, up to 15% of landlords will consider selling their properties if rental income doesn’t cover their mortgage payments. A further 45% may consider selling properties if their values dropped by 10% or more.

Of current property owners, 20% are private landlords and policy makers fear that the increase in buy-to-let lending during the last few years could lead to a slump. However, no changes are likely to be introduced until the tax changes have taken effect in April this year. From this time, anyone who buys a second property, including landlords, will face an extra 3% stamp duty tax at each banding. Mortgage interest tax relief will also be reduced, which will cut the relief received by higher rate tax payers in half.

Most house buyers, whether residential or buy-to-let, will benefit from advice from a mortgage adviser, as they have had training for CeMAP, increasing knowledge of the sector.