What is the future for Buy-to-Let?
For many years, individuals have invested in property to supplement their earnings or to boost retirement income. Over the last couple of years, a number of tax and regulatory changes have made property investment business less profitable.
Only 25% of all loan interest payable (to include advisors fees for obtaining loans) currently achieves tax relief at your highest rate of Income Tax; and you have to wait until you replace domestic items to claim a deduction for their cost of replacement in your accounts.
Unless you own commercial or furnished holiday properties, most property investors will see their net rental returns plummet further after April 2020 by not being able to deduct their loan interest in their accounts. Instead, tax relief will be capped at 20% in the computation which may push basic rate taxpayers into higher rates.
Is it time to sell?
If any of your investment properties were enjoyed and occupied as your home, Private Residence Relief (PRR) may reduce the gain liable to Capital Gains Tax (CGT) on sale. Last October, the Chancellor proposed further restrictions to PRR for disposals after April 2020. The proposed changes are currently being consulted on but if enacted, expect to pay more CGT (and the tax bill within 30 days of completion) if you sell after April 2020.
With the uncertainty of Brexit and depressed confidence, is doing nothing an option?
Some experts predict that some astute investors are still acquiring property despite the 3% Stamp Duty Land Tax surcharge on purchase. New and established property investors may still achieve tax savings by different ownership structures (i.e. limited company, partnership or a Trust) but changes in Government and tax law are inevitable.
Call Katie or Sarah on 01223 810100 to discuss your property investments.