What Now For Buy-To-Let Landlords?
Thinking about buying a rental property? There is a lot more to think about than there used to be. How good a proposition is it these days?
Is property at a price that allows a reasonable yield? Is rental demand high in the area you are looking and will there be capital appreciation?
House price growth is expected to slow in the short term but recover as real household disposable incomes recover at the turn of the decade (source: The Week UK ) “The OBR recorded house price growth of 7.6 per cent last year but reckons this will fall to 6.4 per cent this year. By 2018 it will have almost halved. From there, house prices will increase slowly to 4.6 per cent by 2021.” Read the full article here
This is not like the double digit growth we have seen but it is growth nonetheless.
What about the taxation changes from April this year? As we know, starting with the 2017/18 tax year only 75% of mortgage interest will be allowed against rental income to calculate profit. This decreases annually by 25% until 2020-21 when the level will be zero. Tax will be on turnover and if interest rates rise landlords will feel the effect.
There are a number of things to consider which it is why it is wise to seek qualified advice. Maybe a good fixed rate mortgage is the answer so that interest rate costs are set. It could make sense for some to look at using their main residence as the source of finance as these rates are often lower still.
For the “professional” landlord, the use of a Ltd Company or other special purpose vehicle (SPV) may help with tax planning. If you are currently an expat or overseas resident there are other considerations and for everyone a working knowledge of IHT and CGT is a must. We would always recommend taking specialist tax advice if you feel you may benefit from setting something up and can refer you to accountancy firms we work with for an initial assessment. If you want to chat any of this through, contact us