Tax changes will affect more than half of landlords

Wednesday 4th January 2017

A survey of property investors and landlords conducted by Mortgages for Business has found that 60% of participants believe they will be affected by incoming changes to mortgage interest tax relief and tightened buy-to-let lending checks. 
Some 29% of the 300 landlords surveyed said they don't think they will be affected by the changes - Mortgages for Business suggests these respondents are likely to be basic rate tax payers or already run their property portfolio through a limited company.
The remaining participants said - at the time of the survey in November - that they were still unsure how or if the changes would affect them directly. 
Looking more closely at the tightening of buy-to-let lending guidelines - which was introduced from January 1 - 60% of landlords taking part said they understand the new guidelines.
A further quarter said they partially understand, while 9% said they do not know how they would be affected and 6% were completely unaware of the new system.
Buy-to-let lenders are now obliged to make sure that affordability assessments take into account a borrower’s costs including tax liabilities, verified personal income and possible future interest rate increases (known as 'stress tests').
In response to the impending changes to the way landlords can claim tax relief on the interest of their buy-to-let mortgage, more landlords are incorporating - managing their portfolios through limited company vehicles. 
The November survey found that 32% of respondents currently own at least one property through a limited company, up 2% from May 2016.
When asked whether future purchases would be made personally or using a limited company, 54% opted for the just incorporated route and 16% said they would use both.
These figures correlate with Mortgage for Business’s Limited Company Buy to Let Index, which in Q3 2016 showed that 63% of all new BTL mortgage applications for purchases were made by landlords using corporate vehicles.
Despite the changing environment, the proportion of landlords looking to increase the size of their portfolio has increased from 41% in May 2016 to 45% in November.
"It’s certainly been a tough 18 months or so for landlords, so it’s encouraging to learn that the majority are getting to grips with changes that will dramatically alter the way they operate," comments David Whittaker, chief executive of Mortgages for Business.
Speaking on the changes to mortgage interest tax relief, he said: “We are still encouraging landlords who haven’t already taken professional advice to do so ASAP." 
"The new regime starts in April, so there’s not much time left to make strategic decisions and take action.”

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