BTL tax changes: What you need to know by 10 experts

Experts from Portico, Showhouse, WhatHouse?, Crunch Accountants, The House Shop, Just Landlords, Property Checklists, Tenant Referencing UK, Residential Landlord and John Charcol have collaborated with Experience Invest to provide their insight into April’s upcoming buy-to-let tax relief changes. Read the full article here

Overview of buy-to-let tax changes

From April 2017, the amount of mortgage interest relief landlords can claim will drop to the basic rate of income tax (20%).

Landlords can claim up to 45% at the moment however, once the cap is in place, higher-rate tax payers will feel the pinch. It may also push lower-rate tax payers into a higher bracket.

Click here for more information about the changes.

What do the changes mean for buy-to-let property?

Many industry experts have criticised the move, including Isla MacFarlane, Digital Editor of Showhouse. MacFarlane believes that tenants may feel the crunch more than landlords, “Fewer rental homes and higher expenses for landlords are likely to translate into higher rents.”

This sentiment is echoed by Paul Routledge, CEO of, who strongly believes that the buy-to-let tax changes will put investors off buying UK rental properties, with many landlords already selling up their portfolio.

However, Keith Osborne, editor of WhatHouse? believes that is it not just changes to tax relief which has put landlords off, citing last year’s increase in stamp duty as another reason sentiment towards the sector has changed.

As April approaches, Experience Invest has asked industry experts to provide their top tips and advice for those who think that the changes will affect them.

Tips from the experts:

London-based estate agent, Portico, suggest that landlords should consider re-mortgaging as rates have significantly fallen in recent years.

Dale Anderson of Experience Invest thinks investors should look at niche and off plan opportunities for better returns. Off plan properties, which tend to be cash purchases, will not be subject to the changes. Off plan opportunities like student accommodation, hotels and commercial offices are available assured yields for a pre-determined period through the company.

Just Landlords believe that there is no need to panic about the upcoming changes stating that it is important to remember that many landlords will not be affected by the changes.
The House Shop suggests that DIY landlords should look elsewhere to cut costs. For example, ditching their management agent in favour of managing their own properties could save money.

Kate Faulkner of Property Checklists advises that new landlords to the sector should consider the full tax implications before buying. For those already heavily invested in the sector, Faulkner suggests that some restructuring may be in order to ensure a portfolio remains strong.

Should you set up a limited company?

“Restriction of tax relief on finance costs will not make buy-to-let a less viable form of investment,” Karl Hopkins of Residential Landlord told Experience Invest.

However, limited companies will not be affected by the new buy-to-let tax changes. Instead all profits are subject to corporation tax which currently sits at 20% but will fall to 17% by 2020.

Those who are thinking about going down that route should consider the full implications and seek professional advice before acting.

According to Crunch online accounting agency, a limited company route is more suitable for those who can afford to leave their profits in their business, as regular withdraws will result in corporation tax and dividend tax bills.

“There are other considerations, including the fact that transferring property ownership to a limited company incurs costs, such as Capital Gains Tax (the difference between current market value and the price you originally paid) and Stamp Duty. You’ll also be liable to pay any early redemption fees on your current mortgage deals – your lender will be able to advise you further on this.”

The independent mortgage experts at John Charcol believe that now is a good time for landlords to weigh up their options however, they advise that individuals speak to a credible tax expert so ensure they fully understand how the changes will affect their circumstances.

“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,” Ray Boulger of John Charcol explains.

Seek professional advice

As the April deadline looms, some landlords may still be unsure about the affect changes to mortgage tax relief will have on their property portfolio.

Now is the time to seek professional advice from a trusted source to calculate how these changes will affect individual landlords in the mid-to long-term.