In recent months there has been much discussion surrounding the purchase of second homes and buy-to-let investments – most of which has focused on tax changes being implemented by the Government.
One of the first changes was the new Stamp Duty Land Tax surcharge. This came into play on April 1st, 2016 and has resulted in a hefty 3% added to the up-front cost faced by buy-to-let investors purchasing new properties. The new buy-to-let premium means investors now pay 3% rather than zero on the first £125,000 and 5% rather than 2% on the remainder.
Now the countdown has begun for the newer tax changes that take effect in Spring 2017.
These changes mean that landlords face limits on the amount of mortgage interest they can offset against their rental income when they calculate profits on which to pay tax. In effect, landlords will be taxed on their turnover rather than profit.
There will also be cuts to the useful ‘wear and tear’ allowances that enable investors to offset many maintenance costs against their rental income before calculating their tax bill. Without these, there are fears that more investors may find monthly profits far harder to achieve.
In addition to these tax changes, the Bank of England has also proposed the refining of the acceptance criteria for new borrowers. If these new regulations are agreed upon they could prevent one in five loans that are currently issued.
But it’s not all doom and gloom for buy-to-let investors, interest rates on buy-to-let mortgages continue to fall, while the variety of deals on offer rises.
If you are interested in becoming a buy-to-let investor, contact us – we are independent mortgage brokers based in Neath and servicing clients UK-wide. As independent brokers we are able to search the whole of the market in order to find you the best buy-to-let mortgage deal available.