Government changes to the UK tax system are driving more landlords to consider we buy any house firms when looking to sell tenanted property. Many understand they will not achieve the best price. But for some landlords this is seen as a more guaranteed route to secure a quick sale. This change is in stark contrast to the boom years of buy to let.
So what is happening and how do the we buy any house firms fit in?
Mortgage Interest Relief changes
From 06 April 2017 new tax rules state that going forward landlords will no longer be able to deduct interest costs as an allowable expense. Instead, over the coming year’s mortgage interest costs will be counted in as rental income too.
We know that for landlords being taxed on their gross rental income will come as quite a large shock. After all, this is the biggest single threat landlords face for a very long time. The worry is that there are still many blissfully unaware of the upcoming tax change. Instead, the first time many landlords will hear of this will be when filing Self Assessment accounts in April 2018. If you are a landlord perhaps now is the ideal time to take stock of your plans for your buy to let property.
Time for Buy to Let landlords to adjust
The good news is that as a landlord you will have some time to adjust. HMRC are to introduce a sliding scale method for implementation. This means that over the coming four years mortgage tax relief tax changes will be phased in. The new tax will be introduced by way of a 25% reduction in mortgage interest relief each year up to 2021. After this point, as a landlord your rental income will be taxed under standard income tax rules. The only tax allowance available to you then will be the Personal tax Allowance. And this currently stands at £11,500 per year. You can find out a great deal more about how the tax change will affect you by visiting the HMRC website here.
And there is a further sting in the tail! If you are a landlord who already has a main income, this one tax change could result in you entering the higher-rate tax band.
How will Mortgage Interest Relief tax changes affect the housing market?
Government thinking is that by introducing this new form of tax it will help re-balance the UK housing market. The idea is fairly simple. By restricting a landlords ability to offset mortgage interest payments the hope is this will result in a slowdown in buy to let activity. This would hopefully lead to more first time buyers having the opportunity to buy their first home. The jury is out on how successful this plan will be.
There are some risks to this strategy too.
Many predict that subjecting landlords to this new tax will only result in increased rental prices for tenants. We regularly speak with landlords who are looking to do just this rather than sell buy to let property. This has been classed as the latest tax on tenants.
Others say this that we are in desperate need of landlords providing good quality homes. To tax landlords in this way is to starve the housing market of a much valued Private Rental Sector (PRS). It is expected that a good number of landlords will simply sell up to avoid having to face such a large change in their tax position. And landlords are starting to turn to many of the we buy any house firms for help.
Times are changing for the Buy to Let landlord. The UK Government has made their intentions clear. They want to level the playing field for first time buyers. To survive, today’s landlord has to make a personal commitment in dealing with a significant increase in tax liabilities.
If as a landlord you have decided to sell your property contact our expert buying team at National Property Buyers. We can show you how you could sell quickly and leave the day to day hassles of being a landlord behind.
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