In the summer budget of 2015, George Osborne announced a new policy objective to make the tax system fairer, by restricting the amount of income tax relief landlords can receive. Tax relief on residential property finance costs is due to be restricted to the basic rate of tax. This will ensure that landlords with higher income, no longer receive the most generous tax treatment. The changes will be phased over a four year period from 2017.

Another blow to buy-to-let investors will be the increase in Stamp Duty Land Tax (SDLT), which will apply to those individuals with second homes and buy-to-let properties. The new Stamp Duty rates will become effective from 1st April 2016.

Following the tax changes announced by George Osborne, many landlords and property investors were approaching Homemaker Properties, concerned about the negative affect the tax changes would have on their portfolios. More worryingly, we were also coming across a large number of landlords and investors completely unaware of the impending changes, and with little understanding on how they could potentially be affected. We felt strongly that we needed to provide accurate and knowledgeable advice from qualified tax experts, to ensure landlords and investors were fully informed.

Homemaker Properties held two 90-minute seminars in February, one on the 6th February and one on the 11th February. Both seminars provided information on the tax changes with presentation from one of the biggest accountancy firms in Coventry and Warwickshire. There was also the added benefit of representatives from one of the biggest Commercial Lenders, professional Mortgage Advisors as well as Homemaker Properties, the number one agency in Coventry for House Shares.

The first speaker was Tax Specialist Neil Allcroft from Harrison, Beale & Owen. He summarised the main changes and compared them to the current situation. He also covered who would be affected and how the changes could affect individuals, with a real life example –

Current Position

Gross Rents £400,000
Finance Costs £300,000
Other Costs £20,000
Taxable Profit £80,000
Personal Allowance £10,600
Taxable Profit £69,400
Tax Liability £21,403
Overall Profits £58,597

New Rules (from 2020)

Gross Rents £400,000
Other Costs £20,000
Taxable Profit £380,000
Personal Allowance NIL
Taxable Profit £380,000
Total Gross Tax £157,143
Finance Cost Tax Reducer @ 20% of £80,000 Interest  

£60,000

Net Tax Liability £97,143
Overall Profits (£17,143)

 

After outlining the problem that landlords are going to be facing; Neil offered options for reducing the impact of the tax changes.

The next speaker was the Business Development Manager for Commercial Mortgages, Lee Albino from Shawbrook Bank. Lee provided information on the current market place as well as sharing the alternative offerings they have in comparison to the High Street lenders.

Following on was Head of Bridging and Commercial, Sam Sturdy from Central Finance. Sam gave an insight into what finance is available and why it can be beneficial to appoint a Mortgage Broker for your investment projects.

Finally, Anthony McMullan from Homemaker Properties briefly discussed Letting Agency productivity, providing a solution to assist in those dreaded 31 January Tax Returns.

Anthony summed up the session with a Question and Answer session with all speakers.

A big thank you goes out to all of the speakers that supported the event as well as the attendees for giving up their Saturday morning or Thursday evening to attend. The feedback from the event was overwhelming positive, here is just some of the feedback we received –

 

Great seminar, well done. Exceeded my expectationsSebastien

Really helpful – thank youAbhi

Great to see an event offering content and not selling coursesDave

Well worth attending Narinder

Well run – on time and informative Tanuja

Thank you for an informative morningCharles

 

A copy of the slides from the event can be downloaded from our Resource Library. If you have any questions, or would like to discuss anything further, please call us on 02476 100 390 or fill out our online form and we will call you back!