New tax laws: what has changed for buy to let?
Many buy to let investors will already be aware of the new government changes regarding tax. Whilst announced in the 2015 Autumn Budget, the phased introduction only began in April 2017, which has sparked new conversations surrounding property and buy to let.
So almost 18 months after the changes were first revealed, it’s understandable that there are still questions, but what are the need-to-know ones for landlords and how will this affect future property investments?
The north still prospers
At Sequre, we have long championed the north as the best for buy to let, and with good reason. One key concern regarding tax for landlords has been the revised rules on stamp duty, with those purchasing a second home now expected to pay a 3% surcharge on the existing rates. For those investing in the north, lower house price costs means stamp duty isn’t as detrimental as it can be for those investing in the south. Recently, it was reported that northern towns were among the most affordable in the UK, meaning investors can still pay relatively low stamp duty costs and lower mortgage payments to still make a strong return on their investment.
Will alternative investments stack up?
The phased introduction to mortgage tax relief cuts for landlords may have come as a shock and may have led to some landlords exploring other income options. But when compared to other investment types, buy to let still comes out on top. Cash ISAs, stocks and bonds on the whole offer such little return in comparison. The continuing growth on house prices, currently reported to be rising by as much as 8.8% year-on-year in some northern cities, will see investors benefit from capital growth too.
In his blog for Property Reporter, Sequre MD Graham Davidson gives an extensive run down on the year-on-year tax relief changes which proves that with the right investment, buy to let will still provide a long term profit. You can read the blog here.
Consider the long term
Cuts in tax relief, whilst not completely welcome, are not detrimental for buy to let, and those looking for property investment should always consider the future of their assets as opposed to being tempted into investing in a get-rich-quick scheme. When considering your first buy to let purchase, consider the below points that will outweigh the new tax rules:
- Increasing rents are common practice for buy to let to fit in with the economic changes, and these will play a part in counteracting the profit lost from tax relief cuts.
- The average house price has continued to rise consistently every year since the financial crash and it’s predicted that by 2030, the average UK home could cost £457,433, so investors could seriously reap the benefits of capital appreciation by investing over a longer period.
Financial help can make things clearer
With several changes incurring for landlords in recent times, our team are always happy to help talk you through all options. Here’s a few tips that could give your current buy to let portfolio a helping hand:
- Interest rates are currently at a record low. If you can remortgage a current property and secure a long term fixed rate, it could mean better interest rates for you and your property.
- Some investors have already benefitted by putting their portfolio under a limited company structure and paying a lower rate of corporation tax, as these are not affected by the new tax changes.
We work with specialist advisers that can help give you the best finance options for your buy to let journey. If you’d like to discuss this further, you can call us on 0800 011 2277 and we can recommend the best person to help with your enquiry.
Since the new laws have been in place, there has been little change in the number of buy to let enquiries. At Sequre, sales have increased more than 25% over the last 12 months. Investors are remaining savvy with their property purchase, and by selecting properties in the right locations at reasonable prices, the returns remain attractive. Talk to our team today to find out more about discounted properties.