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Most Brits are unaware of the buy-to-let tax changes

The vast majority of Britons, including many renters who could soon find their rents rising as landlords look to recoup their losses through higher rents, are unaware that mortgage tax relief alterations are now being phased out, according to new research by Vital Research and Statistics on behalf of Experience Invest.

Some 85% of the 2,000 people surveyed are unaware of the tax changes and if given the choice, almost half (45%) would choose to invest in property over other investment assets.

With many landlords likely to face the prospect of having their profits unjustly wiped out by the changes to the existing rules that permit landlords to offset all of their mortgage interest against tax, tenants are likely to pay the price of the government’s unfair tax-grab by paying more money in rent.

Landlords are now restricted to the amount of mortgage interest that they can offset against tax on their property investments.

Most Brits are unaware of the buy-to-let tax changes

By April 2020, once tax relief has been withdrawn altogether, the consequences of Section 24 will mean that it is likely that higher-rate tax payers will only receive 50% of the relief that they currently get, and that is why many landlords will be left with little alternative but to pass higher costs on to tenants.

Ray Boulger, mortgage market expert, said: “The new way to calculate income may push lower rate tax payers into the 40% tax bracket. There will be a substantial effect on landlords who receive child benefits – especially those who have more than one child – and for those who will find themselves in the 45% tax bracket.”

Now is a good time for landlords to seek specialist advice as “there is not a one-size-fits-all solution,” according to Boulger.

He added: “For new purchases setting up as a limited company is one option, as properties held in a limited company structure still qualify for tax deductible mortgage interest rates.”

“However, the impact of capital gains tax and stamp duty land tax will often mean it is not worth switching properties already owned to a limited company structure.” 

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