Many residential landlords are likely to suffer financially as a result of recently phased in changes to tax relief, according to specialist lender Landbay
Following the introduction of the changes yesterday (6th April), the amount of income tax relief landlords can get on residential property finance costs will be restricted to the basic rate of tax.
Paul Brett, managing director of intermediaries at Landbay, said that many landlords are due to take a hit as a consequence of the tax changes.
“Faced with juggling tighter underwriting standards and an additional 3% stamp duty, landlords will be bracing themselves for further margin cuts as costs increase as they lose the right to claim full tax relief on their mortgage payments.
“In this regulatory minefield, it’s now more important than ever that brokers work closely with landlords in reviewing portfolios to ensure revenues remain as stable as possible.
The amount landlords can write off for tax purposes will drop by 25% each tax year until 2020, when they will have to declare all of their rent as income, pay income tax on the total and then claim back for 20% of it as a credit.
“There are ways of managing tax, ownership and mortgage products and although this may incur several further fees along the way, it is arguably the most profitable option for landlords,” Paul added.
“What won’t work is simply hiking up rents to compensate as most tenants are already paying as much as they can afford.”
