Last week, the long-awaited changes to buy to let tax relief came into effect. According to a recent survey carried out by letting agent upad.co.uk has revealed that almost 20% of their landlords are unaware of the increase in tax they will now face on their rental properties.
The survey also revealed that although nearly half of Upad’s landlords knew about the introduction of the new tax structure they didn’t fully understand how this would impact them.
The new changes that came in effect from the 6th April 2017 alter the way you claim tax relief against a buy to let mortgage. This is being rolled out in right through to 2020.
The changes mean that landlords must now pay tax on turnover, rather than the difference between rental income and mortgage interest. Currently tax is due on profits at a landlord’s highest rate of income tax, but between April 2017 and 2020 this system will be replaced and all landlords will pay tax on the full amount less tax relief fixed at 20%.
Changes to buy to let tax – what does this mean for tenants?
There have been lots of comments in the media that this new tax change will have a negative knock-on-effect for tenants as many landlords are predicted to pass on the additional cost incurred. Upad’s research also confirmed this prediction, as they revealed that 20% of the landlords they had surveyed had confirmed they are likely to increase rents to help mitigate the cost of the new tax bill. This ultimately means the tenants could face a permanent increase in rent as a direct result of these new tax changes.
Danny Luke, Managing Director of the UK’s largest house buyer said:
Historically, investing in buy to let property had been seen as a sensible financial move. However, the new tax relief changes combined with additional planned changes due to be rolled out over the next few years, could result in landlords feeling the squeeze financially.
Over the past few months, we have seen an increase in the number of landlords looking to sell their buy-to-let properties. It really wouldn’t take much for a small landlord to be priced out altogether.
If you’re a landlord and are worried about how these changes will affect your bottom line, we can help! In these uncertain times, Quick Move Now can provide you with a no cost, no obligation cash offer for your rental property. We have over £6 million available to directly purchase properties. We can buy any type of house in any location across England and Wales. We make quick decision and the money could be in your bank in as little as 7 days if you require.