We’ve summarised the key regulatory changes affecting buy to let properties, which have been introduced over the past two years by the government and Prudential Regulation Authority.
The government increased stamp duty by 3% for those buying second homes and buy to let properties.
Landlords previously were allowed to deduct an annual allowance from their taxable profits for wear and tear. This allowance was permitted regardless of whether any improvements to the property needed to be made. From April 2016, landlords will need to provide itemised receipts if they wish for the costs to be deducted from their tax.
The Prudential Regulation Authority (PRA), introduced tighter interest rate affordability stress tests. This resulted in lenders towards the end of 2016, increasing their rental cover which meant that landlords borrowing funds in their own individual name will face tougher stress test calculations and therefore the amount they will be able to borrow will be reduced.
Landlords previously could claim back a percentage of their mortgage interest costs, equal to the amount of tax they pay. Those who pay basic rate tax can claim 20% of the mortgage interest, however, those who pay the highest rate of tax can claim back 45%. George Osborne announced in the Summer 2015 Budget that starting from April 2017 all landlords will only be able to reclaim 20 per cent – regardless of the level of tax they pay. This change will be phased in over a four-year period.
For support understanding the latest changes affecting buy to let properties, or for a free review of your current buy to let mortgage products, call our whole of Market and Protection Advisers on 01702 533 400 or request a call back.
