New research has revealed that the vast majority of Brits are unaware of the changes to mortgage tax relief being phased in from today.
From today – the start of the new tax year – landlords will be restricted as to the amount of mortgage interest that they can offset against tax on their property investments.
The withdrawal of tax relief is being phased in so that by April 2020, it is likely that higher-rate taxpayers will only receive 50% of the relief that they currently get – potentially meaning many landlords will be left with little alternative but to pass higher costs on to tenants.
The study, by Vital Research and Statistics on behalf of Experience Invest, however, showed that around 85% of the respondents are unaware of the tax changes – suggesting that unsuspecting tenants could soon face rising rents.
Commenting on the tax changes in LandlordToday, mortgage market expert Ray Boulger was quoted as saying: “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.”
He added that now may be a good time for landlords to seek specialist advice as there is not a one-size-fits-all solution.
New BTL investors may consider setting up their business as a limited company as, said Boulger: “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.”