Following George Osborne’s bombshell for high rate tax landlords, we have received a number of calls from landlords requesting advice.
For starters - don't panic. These changes do not come into effect until 2017 and even then, reductions in tax relief for high rate tax payers will be phased until they come into effect fully in April 2020.
Simon Whittaker, our Finance Director, has run some figures and worked up three comprehensive examples of how the restriction will affect landlords.
So, Boy George is gradually removing the high rate tax relief on landlord's monthly mortgage interest. As MD David Whittaker discusses on page three of the latest edition of FirstRate, buy to let now represents c.18% of the mortgage market and with Mark Carney's comments that these levels may lead to financial instability, it should not be a surprise that the Treasury would look to level the playing field between landlords and home-owners.
My immediate reaction is that with a phased reduction and time to digest and consider the implications, landlords should not make any knee jerk reactions. Talk to your accountant, take advice over the coming months and if you are a high rate tax payer, review your property investment strategy.
One thing I am certain of, is that more landlords will now look to set up limited companies through which to purchase buy to let property. In addition to avoiding the reductions in personal benefits, George Osborne's announcement that Corporation Tax will be cut to 18% by 2020, will inevitably increase the popularity of limited company buy to let mortgages.
Regular readers will know that at Mortgages for Business we specialise in arranging buy to let finance in the name of limited companies. We have access to all the specialist lenders providing this type of finance and have been at the forefront of product design for Ltd Co’s with lenders such as Axis Bank, Landbay, Kent Reliance and our own specialist lending brand Keystone Buy to Let Mortgages to name but a few.
Over the coming weeks, we'll issue more information about the availability and pricing of such products and in the meantime, our website shows the current range of Buy to Let Mortgages for Limited Companies.
If you would like to discuss the proposed changes further, please do not hesitate to get in touch - all of our consultant mortgage brokers will be happy to help.
Contact us on 0845 345 6788.
You might also like to read:
How the restriction of relief on buy to let mortgage interest will affect landlords
Includes working examples