{"id":3055,"date":"2016-10-26T21:27:28","date_gmt":"2016-10-26T21:27:28","guid":{"rendered":"https:\/\/dev.withcreative.co.uk\/lforl\/?p=3055"},"modified":"2016-10-27T08:46:24","modified_gmt":"2016-10-27T08:46:24","slug":"squeeze-buy-let-tax-relief","status":"publish","type":"post","link":"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/","title":{"rendered":"The squeeze on buy-to-let tax relief."},"content":{"rendered":"

\"shutterstock_106204481-1\"<\/a><\/h2>\n

The squeeze on buy-to-let tax relief.<\/h2>\n

New tax rules to be introduced in 2017 will see a reduction in the mortgage interest tax-relief that landlords can claim.\u00a0 Currently, a landlord is entitled to claim tax-relief back on their mortgage interest at their marginal rate of tax. \u00a0In the face of this change, some property professionals are advising landlords to change how they operate their letting business from private ownership to that of a limited company, as a way to avoid this cost.\u00a0\u00a0 However, most experts will agree that landlords must be cautious and get professional tax advice before considering such a move.<\/p>\n

New tax-relief rates for buy-to-lets interest relief.<\/h3>\n

The new regime concerning buy-to-let tax-relief is being incrementally introduced from 6 April 2017 and will be fully implemented by 2020.\u00a0 In a move, experts believe is aimed to cool the market, the Chancellor has reduced the mortgage interest tax-relief that landlords can claim.\u00a0 Currently, a landlord who pays tax under a basic rate get 20% relief, those on a higher rate get 40% and those in the top tier are able to claim 45%.\u00a0 By 2020, a flat rate of 20% will apply to all.\u00a0 Landlords who are in the top two tiers are set to lose significantly in terms of mortgage interest payments with the new rates.<\/p>\n

The Nationwide Building Society recently published estimated figures on how these changes may hit landlords.\u00a0 A landlord with a \u00a3150,000 buy to let mortgage on a property worth \u00a3200,000 with a monthly rent of \u00a3800, would currently have a net profit of around \u00a32,160 a year.\u00a0 Under the new system, the net profit would drop to \u00a3960.<\/p>\n

Further information on these upcoming changes can be found here<\/a><\/p>\n

Landlords move to avoid tax trap.<\/h3>\n

This stark reality of losing profits has prompted landlords to move to avoid this new tax trap.\u00a0 \u00a0One option many are exploring is restructuring their portfolio into a limited company as a way to get around these new tax-relief rules.\u00a0 This move has meant that some landlords have had to sell their existing buy-to-let properties, back to themselves, via a newly formed limited company, owned by themselves.\u00a0 By doing this landlords may avoid paying tax on the cost of running the property.\u00a0 For example this includes offsetting the \u2018allowable expenses\u2019 of mortgage payments, maintenance and lettings fees against their tax bill.\u00a0 Corporation tax is then paid on taxable profits at a rate of 20%, however, this is due to fall to 18% by 2020.\u00a0 Switching ownership of a buy-to-let into a limited company is a case of pay now to avoid tax pain later.<\/p>\n

Too good to be true?<\/h3>\n

However, some property pundits are advising caution with this move due to the direct and indirect costs associated with selling a property.\u00a0 These include capital gains tax, legal fees, and stamp duty on re-purchase.\u00a0\u00a0 Changing to a limited company also means negotiating a new mortgage agreement with lenders, which may also incur an additional expense, and a potentially higher interest rate.\u00a0 For many the cost of switching to a limited company is just too high to justify the returns later.\u00a0\u00a0 In addition, there are stringent legal and financial compliance requirements for company directors that many landlords especially those with smaller portfolios may find unduly onerous.<\/p>\n

Further information on running a limited company can be found here<\/a><\/p>\n

Move with caution.<\/h3>\n

For many the value of switching ownership of a buy-to-let from a personal to a limited company still holds merits.\u00a0 Depending on the financial and tax circumstances of the landlord the long term benefits may still outweigh the shorter term costs.\u00a0 Many experts are advising those buying new buy-to-let properties, or those considering consolidating multiple existing properties under a single loan, to do so under a limited company.<\/p>\n

The new rules are being phased in by 25% a year until 2020\/21 with a mix of the old and new rules being used to calculate taxable income and tax liability.\u00a0 On this basis alone, we at Legalfor<\/em>Landords, strongly advise landlords to seek independent advice from a qualified tax professional before making any decision on their buy-to-let.\u00a0 Tax considerations are specific to the individual and what works for one landlord may not work for another.<\/p>\n

If you are a landlord and need advice on your letting, give us a call 0333 577 9050, or try us on our free advice line 0800 840 7133.<\/p>\n","protected":false},"excerpt":{"rendered":"

The squeeze on buy-to-let tax relief. New tax rules to be introduced in 2017 will see a reduction in the mortgage interest tax-relief that landlords can claim.\u00a0 Currently, a landlord is entitled to claim tax-relief back on their mortgage interest at their marginal rate of tax. \u00a0In the face of this change, some property professionals […]<\/p>\n","protected":false},"author":2,"featured_media":11204,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"yoast_head":"\nThe squeeze on buy-to-let tax relief. - Legal For Landlords<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The squeeze on buy-to-let tax relief. - Legal For Landlords\" \/>\n<meta property=\"og:description\" content=\"The squeeze on buy-to-let tax relief. New tax rules to be introduced in 2017 will see a reduction in the mortgage interest tax-relief that landlords can claim.\u00a0 Currently, a landlord is entitled to claim tax-relief back on their mortgage interest at their marginal rate of tax. \u00a0In the face of this change, some property professionals […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/\" \/>\n<meta property=\"og:site_name\" content=\"Legal For Landlords\" \/>\n<meta property=\"article:published_time\" content=\"2016-10-26T21:27:28+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2016-10-27T08:46:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/dev.withcreative.co.uk\/lforl\/wp-content\/uploads\/2016\/10\/shutterstock_106204481-1-300x212.jpg\" \/>\n<meta name=\"author\" content=\"Joanna Plane\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Joanna Plane\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/\",\"url\":\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/\",\"name\":\"The squeeze on buy-to-let tax relief. - Legal For Landlords\",\"isPartOf\":{\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/#website\"},\"datePublished\":\"2016-10-26T21:27:28+00:00\",\"dateModified\":\"2016-10-27T08:46:24+00:00\",\"author\":{\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/#\/schema\/person\/946561f510196f73204ff7c85e521669\"},\"breadcrumb\":{\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/dev.withcreative.co.uk\/lforl\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The squeeze on buy-to-let tax relief.\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/#website\",\"url\":\"https:\/\/dev.withcreative.co.uk\/lforl\/\",\"name\":\"Legal For Landlords\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/dev.withcreative.co.uk\/lforl\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/#\/schema\/person\/946561f510196f73204ff7c85e521669\",\"name\":\"Joanna Plane\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/dev.withcreative.co.uk\/lforl\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/06c5b9674c084673a3fdc88deb9d7ad9?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/06c5b9674c084673a3fdc88deb9d7ad9?s=96&d=mm&r=g\",\"caption\":\"Joanna Plane\"},\"sameAs\":[\"http:\/\/legal4landlords.com\"],\"url\":\"https:\/\/dev.withcreative.co.uk\/lforl\/author\/joanna_plane\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The squeeze on buy-to-let tax relief. - Legal For Landlords","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/dev.withcreative.co.uk\/lforl\/squeeze-buy-let-tax-relief\/","og_locale":"en_US","og_type":"article","og_title":"The squeeze on buy-to-let tax relief. - Legal For Landlords","og_description":"The squeeze on buy-to-let tax relief. 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