Tax changes for buy-to-let investors

On April 6, a new law came into effect which will stop buy-to-let investors from offsetting their mortgage interest against profits.

The new regulations will be phased in so that landlords will gradually reduce the amount which can be offset against profits, with zero interest being tax deductible by 2020. From 6 April, landlords can offset 75% of their mortgage interest against profits. This will be reduced by 25% every year until 2020.

The biggest impact will be felt by higher rate taxpayers, although they have had some time to prepare for the changes since the announcement in the 2015 Budget. However, as the rental market is currently experiencing strong growth, it is possible that more landlords could find themselves in that tax bracket.

There have been a number of changes made by landlords, in order to prepare for the changes. Some have decided to form limited companies, while others have made the decision to invest in commercial property rather than residential.

Other options have included selling rental properties in London, where taxable profit will be higher, and investing in other areas of the country, which are more cost effective. However, the rental market has dealt with other changes, like the increase in stamp duty tax, so it is likely that landlords will deal with the latest changes.

As the UK has a shortage of housing combined with a broad range of buy-to-let mortgages and some of the lowest interest rates available, investing in property is still a viable option. CeMAP qualified mortgage advisers are able to help potential investors select the most suitable products.


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