Mortgage tax relief – How do the changes affect landlords?

Hi everyone, it's Sarah from homes4harrogate So, recently there has been some concerns amongst landlords that they're going to lose their tax relief on their buy to let mortgages

So, today I've brought in the expert, I've brought in Rick Sherman from Howard Matthews Partnership and he's going to go through some bits and pieces with you to re-assure you that it isn't all lost and buy to let is still a good option Hi Rick, how are you? Yeah, very good So, these tax relief changes on mortgages, who do they affect? So, they primarily affect individuals who rent out residential properties, who have buy to let mortgages to finance them There are a couple of groups who aren't affected by these changes Firstly, people who are renting their properties through limited companies

Ok And the people who have, what's called furnished holiday lets, say air bnb type people Yes, serviced accommodation? Other people have got to have a think about these changes Ok, lovely, so are these changes in place now? When are they coming into force? Yeah, so they came in, they were announced a couple of years ago, but they've just come into play from this April, but they are phased in over four years, so it's not going to be until April 2020 that they're fully in place, it's a transition over four years So, some landlords haven't been affected yet, it doesn't mean that they're not going to be? Exactly, yes

Lovely, so, how is it going to affect landlords then? So, currently you can get full income tax relief on your mortgage costs, so that's just your interest costs rather than the repayments So, you take your rental income, deduct your other costs like agent fees, property repairs, insurance, things like that and you get a rental profit, and that's what you pay tax on Now whats going to change is that you aren't able to necessarily get full income tax relief because it comes out as a credit, ok, of twenty percent, so some landlords pay tax at forty five percent, so you're not going to be able to get full tax relief if you're one of those landlords So, it could end up costing some landlords a bit of money? Yeah, it doesn't affect all landlords, it depends what other income you have, other rent, how much rental income you get, but it's something that you just have to look at to see if it's going to affect you, your bottom line profit and how much tax you pay So, it's very much a case of not one size fits all, it's individuals who need to speak to somebody like yourself about their individual circumstances? Yeah, so you need to look at what, how the loan to value and how much their mortgage costs is as a proportion of what their other costs, to work out if they're going to be affected

As I say, it's phased in over four years so it might not necessarily affect them for the next couple of years Ok, so is there anything else, apart from getting some sort of expert advice, they need to be doing right now? Well there is a couple of planning tips they you can do, that it's worth taking expert advice on, for example, running your properties through a limited company rather than an individual name, is something that quite a lot of people are doing There are tax consequences with doing that kind of thing, so the best thing is to seek advice before you go ahead, and just form a limited company Yeah, so basically in conclusion then, there are tax changes to mortgages for landlords but they need to seek advice and with proper planning it shouldn't be too much of a concern for them depending on their individual circumstances Yeah, everyone's different in their own circumstances, so as long as they seek advice then these things shouldn't buy too badly

Lovely, thank you Rick So that's Rick Sherman from Howard Matthews Partnership and I'm Sarah Johnston from homes4harrogate Thank you for watching

Source: Youtube

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