Budget Tax Changes for Buy to Let Landlords

Budget Tax Changes for Buy to Let Landlords

Tax Changes to be Introduced in 2017

Budget Tax Changes for Buy to Let Landlords

The Budget yesterday has announced a significant number of changes to the way the the UK does business - one change is going to be of particular interest to our Investment Landlords...

The Chancellor has announced the introduciton of significant changes in the way that mortgage relief on taxable income is treated for middle and high income earners.

The amount landlords can claim as relief will, from 2017, be set at the basic rate of tax – currently 20 per cent, in a move which is said to 'level the playing field for homebuyers and investors’. Whilst some industry experts believe this will cool the buy-to-let market, making some property investment less attractive.

Roughly 1 in 5 of the Islands properties are Privately Rented and many of the Island's Landlords are in the Higher Tax Bracket.  We consider that this move is is likely to result in modest rent rises across the Island as Landlords seek to reclaim the additional costs.  In turn, this move could eventually favour some of our landlords who are living below the higher rate tax threshold.

Rental properties are still in very short supply across the Island and demand from good quality tenants remains consistently high.  We anticipate that rental increases will continue to outpace inflation for the foreseeable future.

Once your accountant has been given a little time to digest the changes in yesterday's budget - we recommend giving them a quick call to disucss your own situation with them.  Remember though - the changes won't be introduced until 2017.

 David Cox, managing director, Association of Residential Letting Agents, comments on the housing measures announced in the Chancellor’s Emergency Budget:

"In a bid to limit the growth in buy-to-let properties, the Chancellor has announced plans to reduce the amount of tax relief investors can claim on mortgage interest payments. At a time when the supply of rental property is already struggling to meet demand, it is dangerous to try and reduce growth in the rental market.

"The Chancellor has also replaced the wear and tear costs to a new system that means landlords can only deduct the exact amount that they will incur. However, the unintended consequence of this, and the reduction in income tax is that landlords will seek to recoup their costs by hiking up rents. As a result, tenants will have to save for longer to be able to afford a deposit for a house, as more of their income will be eaten up by rent. This creates a vicious circle where tenants are renting for longer because the hope of owning a home becomes less achievable. The Government needs to think about the market more holistically and while the rental market remains such an important tenure, we need to find the right balance between landlord taxation and tenant aspiration."