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Summer Budget - Bad News for buy-to-let landlords!
Buy-to-let landlords and housing associations have been dealt a double blow by Chancellor George Osborne as he delivered his "big Budget for a country with big ambitions”.
Mortgage interest relief for individual landlords of residential property will be curbed to the basic rate of income tax. This restriction will be phased in over 4 years, starting from April 2017. This is aimed at addressing the rapid growth of buy-to-let mortgages which the Bank of England has noted, in its recent Financial Stability Report, poses a risk to the UK's financial stability. The Chancellor further claims this is to "level the playing field" as it was "unfair" that landlords enjoyed this tax perk but owner occupiers did not.
This will have a serious impact on those investing in buy-to-let property and significantly removes the attractiveness of second home ownership. It poses a potentially substantial increase in tax bills, thus impacting severely on profits. It appears likely this will affect individual landlords in partnership (as well as those holding property in their own right) which could also mean investors in partnership fund vehicles holding residential property could be affected. Conversely, there is no indication that corporate landlords will be affected.
Additionally, from April 2016, landlords of furnished residential property will only be able to deduct from their rental income costs which are actually incurred on furnishings (currently a 10% deduction for wear and tear is permitted, irrespective of expenditure). Again, this will impact on profitability.
An equally significant blow was dealt to social housing providers, as the Chancellor announced they would be forced to cut rents by 1% per year over the parliament.
There are ways to minimise losses. We will be hosting a seminar at 11:30 on 26 August 2015 where the industry experts will help show you how to maximise your investment and reduce the impact of the tax bill.” If you would like to attend please email Julie Condliffe or call her on (01234) 802 439.
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