Changes being introduced next year will mean that for individuals it will be no longer possible to offset mortgage payments against the income from residential lettings.
This will severely impact many investors with high loan-to-value mortgages.
For example, if a buy-to-let landlord currently has a £60,000 mortgage on a £70,000 house (which is common in this area), with an annual rental of £5,000 and a mortgage payment of £2,800 per annum, the landlord would currently be taxed on £2,200 (i.e. the difference between income and expenditure in the example given).
However, in the future, the tax will be on the full £5,000 less expenses.
To counteract this and reduce the tax paid, many landlords are considering transferring the houses into a limited company.
However, this raises various issues, for example:
- It will be a sale and there may be Capital Gains Tax (CGT) implications.
- Many lenders who are happy to lend to individuals will not lend to limited companies.
- The terms available are often less favourable and may mean lower loan-to-value ratios, higher fees and interest rates.
So, first and foremost, it is important that a valuation assessment of the property is undertaken.
Here at Lea Hough we can help by providing accurate Valuations of the properties and providing hard information, upon which landlords are able to base the decision.
We can assist individual landlords with one buy-to-let house, landlords with large portfolios, and well as accountants, solicitors and advisors.
Our Chartered Valuation Surveyors and RICS Registered Valuers can carry out desktop or full inspections and, using the extensive evidence data base (as used by major mortgage lenders) we can give realistic values, so you can consider if the mortgages would be available at the ratios being offered, and if the values will impact on CGT, etc.
Please contact us on 01254 260196 or 01772 458866 to discuss how we can help.