Buy-to-let Landlords Struggle with Tax Increases

Buy-to-let Landlords Struggle with Tax Increases

13 Oct Buy-to-let Landlords Struggle with Tax Increases

As landlords lose battle challenging the buy-to-let tax changes, more and more of Britain’s largest buy to let landlords are planning to sell off their homes. Read on to find out what this means for you and how you can save money as a landlord by having your Home Reports carried out with us.

Tax Changes for Landlords

Landlords and the property industry lashed out at George Osborne after he extended a planned increase to stamp duty and exempted them from his cuts to Capital Gains Tax (CGT). They were the latest in a string of tax increases on property investors.

In December last year, a group representing 250 landlords launched a court challenge against tax changes to buy to let coming into force in 2017, claiming they have been victimised by the chancellor, George Osborne. However, it was announced last week that landlords represented by Cherie Booth QC have failed in their legal battle against a planned government tax increase on buy-to-let properties.

The changes which are to be phased in from 2017, will effect individuals who own rental property in their own names. Companies which own buy to let properties, wealthy cash investors and landlords of holidays rentals are excluded.

The courts decision to leave the planned tax increases in place, has failed to protect landlords, tenants and the housing market from potentially disastrous consequences.  The higher stamp duty on buy-to-let properties will ultimately make rents more expensive which in turn eats into people’s ability to save up toward a deposit. The new policy is misguided as in its attempt to reduce demand by some buyers, as it ignores the fact that the private rental sector provides an essential service for millions of adults who are happy to rent, especially in their 20s and 30s. By hitting the rental sector with higher taxes and lower reliefs the chancellor is making renting more expensive and getting on the ladder even harder for Generation Rent.

With the emerging pressures that are building on buy-to-let landlords as a result of the Government’s tax increases, a huge number of Britain’s largest buy to let landlords are planning to sell off their homes, Blaming George Osborne for effectively raising their tax to more than 100%. In some instances, interest rate rises will tip them into bankruptcy.

Buy-to-let could become unprofitable in seven out of 10 towns and cities by 2020 if interest rates were to rise by 2.5 percentage points, according to data obtained by Telegraph Money.

Tax Relief

At present landlords can claim for interest on buy-to-let mortgage payments when they complete their tax return, allowing them to offset mortgage interest against rental income. The changes will be phased in gradually from 6 April 2017 and will be fully in place from 6 April 2020.

In effect, landlords will be taxed on their turnover rather than profit. If landlords want to stay in the market, they won’t have any choice but to increase rents, although this could be very difficult and it is likely a considerable number of landlords will exit the market over the next five years.

Home Reports for Landlords

With landlords beginning to look at selling or their property portfolios, they will require Home Reports to be carried out.

At the start of 2016, the RICS instructed surveyors providing Home Reports in Scotland to not include potential rental incomes in Home Reports. As a result, a Home Report will never be utilised for lending on an investment purchase in Scotland. In every instance, the lender will carry out their own valuation, most probably by an in-house Valuer to enable mortgage funds to be granted, therefore the optional mortgage valuation document (MVR) is not required in a buy to let sale and there is no added value in having one.

Many companies will try to persuade you that because their Home Report includes a valuation report, that it will save you money – it won’t! As stated above, a MVR will always now be carried out by the lender when the home report is used for an investment or buy to let property sale as the lender will require added commentary with regards to potential rental income. We carry out Home Reports at very competitive prices, will provide a quality service from a RICS Chartered Surveying Firm and have appointments available at a time to suit you.

For more information on Home Reports, give us a call on 0131 608 0175 or drop us an email at






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