The reduction in mortgage interest tax relief may already be starting to make it more difficult for investors to get mortgages, as some lenders increase rental cover ratios to accommodate the reduced margins available to geared investors.
The raft of tax measures builds momentum in April of 2017 with the introduction of limitations on tax relief applied to mortgage interest costs, adding to the reduced furnished property ‘wear and tear’ allowance and the increased rates of Capital Gains Tax due on residential property. Not to mention the 3% surcharge on the Stamp Duty bill for buy-to-let landlords.
What’s more the Prudential Regulatory Authority (PRA) has announced tighter underwriting rules in 2017 for the buy-to-let sector. Investor affordability tests have to be carried out when assessing a buy-to-let application, which includes an interest coverage ratio test as well as, or instead of an income affordability test, which takes into account the borrower’s personal income to support the mortgage payment.
Some property investors are aware of the situation facing them and what they must do to succeed.
Although few have already taken steps to make the necessary changes or adopt different practices.
Many others are not even aware. It’s a veritable war of the wits and it’s time to prepare to put your best foot forward, or at least man your defences.
A way forward for property investors?
Some may consider investing in property via a private limited company to avoid the additional 3 per cent increase in stamp duty. Other landlords may buy in areas where housing stock can be acquired for under £125,000 to minimise the stamp duty penalty, or change their strategy in some other form.
There are a number of options and an array of things to consider.
If you want to:
- look for ways to minimise the impact of the new UK property taxes on your portfolio?
- grow your portfolio in the most tax-efficient manner?
- simply hear new ideas or get some inspiration?
Then why not join us for a free evening on 10th November in Westminster as three experts – property and tax, join forces to give you strategies to manage and grow your property interests
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Tags: Buy to let, foreign buy-to-let, investment property, Risk & Reward, tax