The recent taxation changes regarding buy-to-let property have not been particularly favourable.
There has been the introduction of the additional 3% Stamp Land Duty Tax on acquiring a second property and the significant reduction in capital gains tax rates announced in the 2016 Budget did not apply to residential property which make both buying and selling a buy-to-let more expensive. In addition, the change over the next four years which will result in mortgage interest relief as an expense being abolished and replaced with a 20% tax credit will start to make the annual return on buy-to-let properties that little bit lower for many and may, in some circumstances, mean that the tax liability on that source of income outweigh the net income itself.
However, it seems that buy-to-let market continues to be a competitive one and many are still favouring investing in bricks and mortar. Lenders have worked to keep the market alive following the former Chancellor’s changes. Five years ago , the average rate for a two year fixed was just over 5% but now there are deals available that provide the same term length but with a rate that is less than 2%. With the recent reduction in Bank of England Base rate to 0.25% these rates may reduce even further. The rates for Companies are not so competitive or products readily available, but with this becoming a vehicle that some investors are considering, this may change too in time.
If you have any queries on this subject, please contact our specialist property & construction team on [email protected]