Current buy-to-Let Changes

by Ed Firmin

Posted on Friday, June 10th, 2016 at 14:26

Current buy-to-let changes – Four things that YOU need to know

The Government has recently announced changes to the country’s buy-to-let regulations. Many of the country’s landlords are becoming increasingly worried about what that will mean for their business and the future of their investments. What will this mean for you? Read ahead to learn more about the current buy-to-let changes taking effect across the country.

A new budget – and a bad deal for landlords

At the end of March, Tory MP George Osborne’s latest Budget was announced, and it very clearly seems to be biased against buy-to-let investments in the residential property market. While other financial investments seem to be promoted as an alternative, it is clear that the Government is hoping to discourage new individuals from investing in buy to let properties.

Here are four ways that they have clamped down on buy-to-let landlords.

1. Stamp Duty changes. Stamp Duty will increase on your secondary properties (anything worth more than £40,000), as they are now subject to a 3% surcharge. That means that the Stamp Duty on a £500,000 property will now come in at £30,000, or 6% of the purchase price – enough to put a large damper on your plans to buy more properties.

2. Cuts to income-tax relief on mortgage interest. In the past, tax relief on mortgage interest for buy-to-let properties was calculated at the landlord’s marginal rate of income tax (up to a tidy 45%), meaning a large break on income tax for many landlords. This has now changed, as income tax relief will only be allowable at 20%. This won’t cause much of a change for basic-rate taxpayers, but will make a big change for those in the higher rate brackets.

3. Capital gains tax rates will be unchanged for property. The Budget announcement came with the news that investments will now draw a lower rate of capital gains tax upon resale, falling from the current basic rate of 18% to just 10%. This will not affect your primary residence, but could potentially cause you grief when selling any buy-to-let properties in your portfolio.

4. Income tax will be charged on buy-to-let turnover, and not the income generated. This change could be potentially pricy for any buy-to-let landlords, as your income tax will not be generated on the actual profit and income generated from your properties. It will instead by charged on the turnover rate, a seemingly small difference that could actually be very costly for most landlords.

If you find yourself feeling disgruntled about these recent changes, have your say. Write and email your local MP and add your voice to this ongoing battle between the Tory government and the country’s buy-to-let landlords.

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