The government have announced recently new legislation affecting tax relief for buy to let landlords, causing further pressure on finances.

The changes will affect the buy-to-let tax relief for landlords purchasing new homes, and further financial strain will be caused with possible rises to interest rates in may this year.

This is causing existing landlords with smaller portfolios to potentially sell before the Brexit negotiations become effective to avoid loss of value.

Studies show that approximately 70% of landlords are considering selling one property and 10% have already begun to do so.

Landlords are also encouraged to consider researching a reduction in tax before completing their tax returns to avoid any unnecessary surprises.

With these new legislations in place, it is more than likely that rental prices will increase also coinciding with the Brexit negotiations and the upcoming tenant fees ban.

While this is a good investment for landlords to consider as they will be receiving a higher rental yield, landlords will also have to consider the rise of the costs in the buy to let mortgages rates, therefore resulting in landlords making smaller profits or the costs balancing out.

However, company landlords can benefit from the tax relief changes as they will be able to offset this as a business expense.

Although company landlords are subject to additional stamp duty of 3% when purchasing a new property, this can be offset if the landlords wish to sell the property in the future against capital gains such as incoming rent they have acquired.

This capital gain however would be taxed at a rate of 18% or 28% depending on situational circumstances.

Non company landlords face higher fees on lending however, with a 20% tax applicable to profits.

Homeowners are more optimistic than landlords that they would be able to afford their mortgages with more than 80% being in a comfortable position to afford.

Fixed rate mortgages are preferred by the majority of homeowners and landlords as opposed to interest only mortgages.

The recent increase in stamp duty has also forced many landlords to reconsider exactly which mortgage would be more suitable for them going forward and after all negotiations have been completed.

If you have any questions concerning the fees and the legislation involved, do not hesitate to call the office on 01325 582101.


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