Waterfords warn landlords who may be unaware of mortgage interest tax relief change

News at Waterfords | 16/03/2017

Waterfords want to warn landlords who may by unaware of an impending mortgage interest tax relief change, which comes into force in the new financial year 2017. The Tenant Referencing UK website has polled 1,000 of its members and found that 70% of those polled were oblivious to any tax change at all. The worrying statistic proves that many landlords are unaware of the effect it is going to have on their rental income and tenancies over the following four years.

On 5th April 2017 at midnight, the last day of the financial year, investors will no longer be able to claim high rate tax relief on mortgage interest payments.

The move was announced by former Chancellor George Osbourne in 2015 along with other tax measures that affect landlord’s pockets. Since last April, second home buyers and investors have had to pay a 3% stamp duty surcharge, driving up the bill on £300,000 property from £5000 to £14000.  Osbourne also abandoned rules allowing landlords to claim a 10% tax break for wear and tear, now only letting them deduct the costs they actually incur.

Currently landlords pay income tax on rental earnings after mortgage interest payments (and other costs) have been deducted.

This effectively gives them relief at 20, 40 or 45% depending on the tax bracket they sit in. In the future, they will pay tax on their full rental income and get a tax credit instead, which will be phased in over four years and worth just 20% in the 2020/21 tax year.

This is bad news for some landlords as by 2021 some will be pushed into the higher rate tax bracket. Ironically, wealthy landlords who don’t require a buy-to-let mortgage will escape the tax. It is also good news for long-standing landlords who have paid down much of their mortgage debt who will most likely be able to ride out these changes.

It’s not all doom and gloom for UK landlords. In fact there is evidence that the buy-to-let market is flourishing. With over 100 more deals available compared to the same period last year and the average fixed rate on buy-to-let falling over the last 12 months, landlords can make considerable savings by switching to a new mortgage deal, reducing their monthly payments.

The Waterfords team can arrange a free no-obligation financial advice appointment to see if you could take advantage of a new mortgage deal, maximising your investment.

The UK economy has shown a much greater resilience to the Brexit vote than predicted. Despite the political uncertainty a somewhat slow but steady rise in house prices should continue throughout 2017, underpinned by the shortage of housing stock and low borrowing costs for buyers. We are witnessing encouraging signs in the lettings market, with the number of tenants looking to rent through Waterfords up by 49% on the same period last year.

With buyer and tenant demand up and a continued shortage of housing in both the lettings and residential sales sector, now is an opportune time to sell or let your home with your multi-award-winning local estate agent for a desirable asking price.

If you are not thinking of selling or letting, we are still happy to offer a no obligation market appraisal or simply provide advice on local property market conditions and mortgage options.

Call us on 01252 235348 or email: lettings@waterfords.co.uk