Greengates Builders Merchants

Is It Time To Cash In Your Buy-To-Let Properties?

If you're a buy-to-let investor, you'd be forgiven for feeling rather despondent following the Chancellor's crackdown.

A stamp duty hike for buy-to-let purchases has already arrived - with a corres­ponding spike in sales beforehand - and mortgage interest relief for tax on rental income will start to be hacked back next April.

Off the back of a tax squeeze on both purchases and income, you may even be thinking of quitting life as a landlord altogether. But is selling up and cashing in any profits a wise move?

Amid the policy changes that are being introduced, the two that will have the biggest financial impact are the extra 3 per cent stamp duty due on buy-to-let property purchases and the reduction in tax relief available to landlords.

Stamp duty

For those buying a new property, the extra stamp duty charge, which arrived on 1 April this year, could be largely absorbed by capital gains made by an increase in house prices or by raising rent.which is exactly what the Government was hoping to avoid by introducing these changes.'

Income tax

What about the reduction in the mortgage interest tax relief that landlords can claim? The Chancellor has capped this at 20 per cent, meaning it will hit those landlords who pay a higher rate of tax.

Previously all mortgage interest could be offset against rental income, with landlords only paying income tax at their marginal rate on the profit in-between.

From April 2017, the tax position will start to shift towards one where mortgage interest relief is capped at the equivalent of basic rate tax from 2020 - currently 20 per cent.

Maybe now is the time to investigate exactly what is going to happen with your rental properties and make your decisions sooner rather than later.

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