Buy to Let Landlord Tax Changes

Commercial Buy to Let Mortgages and Landlord Tax Changes

Buy-to-let landlords have yet to wake up to the increased taxes posed by former Chancellor George Osborne's tax crackdown announced in Autumn 2015. Investment experts have warned that landlords don't realise the increased tax burden they are facing and could be in for a shock. As experts in commercial buy to let mortgages, this article looks in more detail at the issue.

It’s all about Increasing the Tax Liability of Buy to Let Landlords

As property values have increased over the years, Buy to Let landlords have been lulled into a false sense of security. The former Chancellor’s tax relief changes and the harsh new reality hasn’t yet sunk in for Buy To Let investors. The worst-affected landlords could potentially see their tax bills double.

Landlords will start to find it hard to get to grips with the fact that they will be prevented from deducting mortgage interest from their profits and will instead be given a 20% tax credit on their eventual tax bill. This, in addition to the removal of the 10% wear and tear allowance, will significantly increase the tax liability.

What Does it all Mean for Commercial Buy to Let Mortgages?

For higher-rate taxpayers this means effectively paying tax on mortgage interest, in addition to the interest itself.  The balance has certainly tipped in favour of wealthier investors who do not need a mortgage.

With so many people buying a buy-to-let property to supplement their retirement incomes, many may see their plans shattered with the tax change taking effect.

Figures show that the UK tax rate on buy-to-let investments is already higher than in many other countries, even before Chancellor George Osborne planned assault on tax breaks. The Chancellor's forthcoming tax changes may well drive some landlords out of the market.

George Osborne claimed to be trying to level the playing field between landlords and first-time buyers by cutting higher rate mortgage tax relief, but now it seems that landlords already face relatively high taxes.

A report in The Daily Telegraph claims that buy-to-let investors are already more harshly taxed than those in the US, Germany and France. It said that most countries allow landlords to deduct mortgage interest costs in full and set any rental losses against their other income, they can also secure capital gains tax discounts and claim depreciation against their properties.

The research was based on a study published by the London School of Economics in 2011 which compared the tax relief available to British landlords with those in other countries and concluded that Britain’s tax incentives for landlords fell behind those offered in other countries.

Talk to us if you are Looking for a Commercial Buy to Let Mortgage

These new proposals add complexity and cost to the buy to let market. At Senate Money we have access to all of the lenders in the commercial buy to let mortgages market. We know how the buy to let market works, and we guarantee to get the best possible deal for you, bearing in mind these changes.

Contact us or call us on 01675 443878 for an initial discussion.