With Brexit now officially ‘done’, you could be forgiven for thinking that the rest of the year is likely to be somewhat less eventful. However, with a number of major legislative changes afoot impacting business owners, homeowners and savvy investors alike, and the Spring Budget yet to be announced, it is fair to say that may not be the case.
As we enter the new tax year, we are expecting to see the National Minimum Wage rise, changes to the way we pay National Insurance, and the introduction of the Government’s ambitious Good Work Plan coming into play.
For those professionals who have also invested in property as a way to create revenue, the tax and regulation changes that are set to take place in April may have left some of you considering whether it’s worth maintaining your portfolio.
This month Stephen Gordon , Head of Business Legal Services talks about what options Property Investors and Landlords have when mitigating against Government changes.
Buy-to-let properties have long been considered a safe investment to fund the future, with ONS statistics suggesting that 49% of people considering it the number one way to save for retirement.
But with the government inflicting tighter tax and mortgage regulations upon buy-to-let properties, it is no surprise that many landlords are concerned that their profits will start to dwindle – especially if the tax changes are likely to push those who are currently base-rate taxpayers into the higher-rate bracket once their rental income has been taken into account.
However, there are some options available to those affected.
Although the availability of tax relief to individual landlords is being completely scrapped this year, if you’re a limited company you can still offset 100 per cent of any interest charges.
This might help us to understand why almost half of all buy-to-let mortgage transactions in 2018 were by limited companies instead of individuals, with incorporating, for many, the key to maintaining profitability.
However, when considering this journey there are a myriad of issues at play, and it’s advisable to seek specialist legal advice in order to ensure that this is the right option – taking into consideration other extenuating factors, and the size of the portfolio in question.
If you are not a large-scale landlord, moving your property portfolio may not be in your financial interests as mortgage rates for businesses are often higher.
In addition, transferring a mortgage is not always straight forward, and it will incur several fees including Stamp Duty on the properties in question. This may put some people off.
In such cases, investors may want to consider what other alternatives are available - such as getting a lower mortgage rate or reducing the mortgage amount on your buy-to-let property by paying off a large portion of it.
Either way, there are options, and the most important thing is to take all of the factors into consideration in order to determine the best course of action. And remember, whilst the changes will come into force on April 7th, 2020, you do not need to have made any major decisions by this date. It is possible to make changes once the new legislation is in place.