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November 1, 2018
Buy to Let Mortgages Changes

Buy to Let Mortgages – Changes in Tax and Rates

Buy to Let Market Overview

Buy to let mortgages have been at the forefront of the news and the 2018 budget. Many landlords are noticing the squeeze and BTL mortgages and their profitability is becoming increasingly complex. After the 2018 budget released a few days ago, in which the announcement barely mentioned anything directly relating to landlords and the buy to let property market, there are a number of notable changes which need to be considered:

  • Personal Tax Threshold and Tax-Free Allowance changes – the personal allowance will increase in 2019 to £12,500 and the higher rate tax bracket will increase to £50,000.
  • VAT Threshold remains unchanged
  • Lettings Relief on Capital Gains Tax will be limited to shared occupancy properties where the landlord is letting a room within their primary residence.

In comparison to previous budgets, landlords who invest in buy to let properties have gotten off lightly. The property market is likely to remain steady, subject to to the Brexit outcome as the first-time buyers market will thankfully still benefit from the Help to Buy Scheme.

Changes to Buy to Let Tax

One of the key change in tax for BTL mortgages are the interest restrictions and relief. Until recently, landlords had the ability to offset interest expenses on mortgages against their income from renting the property. Unfortunately, this is coming to an end and whilst it was reduced to 75% in 2017, next year landlords will be looking at a restriction of 50% which is quite considerable. This means that it’s even more important to ensure that your buy to let mortgage rates are the best they can be by using a buy to let mortgage broker here to calculate repayments.

Changes to Energy Efficiency Measures

New regulations are being introduced to help protect the environment and regulate energy usage within properties in the UK. There is now a minimum requirement of E for any new tenancies on an EPC (Energy Performance Certificate). The good news is that this isn’t particularly high and most properties which benefit from double-glazing and central heating should fall within this bracket.

Setting up a Limited Company – A possible solution?

Many landlords who span ownership over more than 2 buy to let properties may benefit from setting up a limited company. It’s important to seek professional advice on this option as the circumstances will vary for each landlord. In fact, the vast majority of buy to let mortgages are being taken out under a limited company – it may be as high as 70% of applications being made.

The shift to setting up a limited company has been because of the increasing restraints on the private rental sector. By using a limited company, the interest rates can be offset as an expense instead of losing 50% in 2019 from the restrictions imposed in the latest budget. It’s important to consider that there are other costs associated with setting up a limited company such as accountancy fees, VAT returns (if applicable) and end of year returns which need filing.

HMRC and the government are always looking for ways to close loopholes such as these, so it’s likely to be tightened up in the future. An article here on Simply Business goes into more detail.

Concluding, it’s important to be aware and plan ahead if you have a buy to let property as it’s predicted that at the end of Jan 2019, when landlords will have to pay their tax bills, that many will not have realised the drop from 75% to 50% and will suffer from it.

 

September 20, 2018
Top tips on how to save for a mortgage

Top tips on how to save for a mortgage

Welcome! Today we will be going over some top tips on how to save up for a mortgage or increase your chances of getting one and finally getting onto that property ladder!

Initially the best thing that you can do to increase your chances of getting a property and actually getting onto that ladder is to gather as much deposit as you can. You can try a variety of options to do this, the main and best way will probably be whilst you are still living at home with your parents, to try and put as much aside as possible as you will be saving on bills and rent. If you are not living with them and are renting a property, it may be worth considering moving into a place where the rent is cheaper and save the rest aside towards the deposit. Just be mindful of what you spend your money on and making just some small cutbacks will all add up…think to yourself, do I really need that coffee from the café, I could take my own flask of coffee and save that money daily instead.

If they are feeling generous, they may even add to your savings by giving you a lump sum to help you along onto the property ladder, good old bank of Mum and Dad! The more deposit you can save, the more money you will be putting into your property and hopefully will also mean not requiring such a large mortgage. With any luck this will just be a gift and won’t have to pay it back, but you could also set out a monthly plan of payback with them which you will need to then obviously take into consideration when looking at mortgage repayments. You’ll need to find out how much you can borrow on your mortgage with an online mortgage calculator such as this one from Mortgage Arrangers. This particular tool is aimed towards those looking for a mortgage in the UK.

Another way to raise some cash towards a deposit is to sell things you no longer want or need on marketplaces such as eBay or Facebook. You will be surprised how many people will want what you no longer see as useful. Clothing, household items, books, the list is endless and as they say every little helps!

Some savings accounts might be worth looking into, although the interest rates are quite low at the moment and the base rate is currently 0.75%, over the years it may take you to save up for a sufficient deposit, it may be worth looking into some long term savings accounts. Will be worth your while having a look around for a good deal, doesn’t even necessarily have to be a savings account. Maybe a comparison site would be the best place for this and compare which would suit you best.

Then the next thing to do then is to maybe find a mortgage broker. This would be a good option for you to go over and discuss all the different types of mortgages available to you and the best one that would suit you in relation to how much you can pay back a month, whether it be fixed or variable rate, repayment or interest only plus other options such as tracker mortgages etc.