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Buy-to-let landlords selling up to escape tax crackdown

Buy-to-let landlords are gearing up to offload their properties after waking up to the impact of Chancellor George Osborne's recent tax crackdown, reports suggest.

Hundreds of thousands of landlords could lose thousands of pounds per property after Chancellor George Osborne announced a crackdown on higher rate tax relief in his emergency Budget in July.

Specialist accountants have warned that amateur landlords face a severe dent in their profits from buy-to-let.

New research suggests that landlords and their accountants are only just waking up to the implications of the complex new tax regime, which is phased in over three years from April 2017.

A report in The Daily Telegraph said some landlords are already paying 100% of their profits in tax and the changes could increase that to 150%. They are beginning to sell up as a result.

It said that all higher-rate taxpayers who own buy‑to‑let properties on which there is a large mortgage will pay substantially more tax.

Even some basic-rate taxpayers will be hit, because the change will push them into the higher-rate tax bracket.

The worst afflicted will see the amount of tax they pay double, while some will pay 100% of their profits in tax.

This is forcing them to increase their rents sharply, or sell up.

The report noted that "modest middle-class savers who have prudently chosen to invest in buy‑to‑let” to supplement their retirement income will be hit hardest of all.

Wealthy landlords who don't need mortgages won't be affected, while many professional landlords with large portfolios can set themselves up as limited companies to avoid the tax.

Accountancy firm Smith & Williamson, quoted in the article, calculates that any higher-rate taxpayer landlord whose mortgage interest is 75% or more of their rental income, net of other expenses, will see all of their returns wiped out by 2020.

So mortgage costs above 75% of rental income will mean the buy‑to‑let investments become loss-making, it said.

For 45% taxpayers, the threshold is 68% of rental income. Those who bought recently with larger mortgages are likely to be hit hardest.

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    Please sign the petition against this and circulate the link as widely as you can:
    https://petition.parliament.uk/petitions/104880

    This is a disastrous and ridiculous policy

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    Signed!

     
    Rookie Landlord

    Me too.

     
  • Brit Sixteen Sixty Four

    Personally I think the tax changes are great. It takes away the buy to let tax advantages over first time buyers. It's time landlords contribute their fair share of tax.

    Smart landlords would of been selling already before the majority try. These tax changes may not be good for landlords but it is good news for the majority who aren't. Landlords selling will bring down the over inflated property prices which will help priced out first time buyers have a chance.

    Well done George for once.

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    Agreed, the changes are spot on and are a long time overdue.
    Do stop bleating about it Ros. You took a gamble and you lost. Cut your losses and move on instead of giving everyone earache with all the "oh! it's so unfair" nonsense.

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    Couldn't have said it better myself, John!

     
  • icon

    Please sign the petition against this and circulate the link as widely as you can:
    https://petition.parliament.uk/petitions/104880

    This is a disastrous and ridiculous policy...


    I'm with you on that one, Rosalind.

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    Personally I think the tax changes are great.


    Not sure about that!

  • icon

    Personally I think the tax changes are great. It takes away the buy to let tax advantages over first time buyers. It's time landlords contribute their fair share of tax.

    Smart landlords would of ...


    Brit - you know what you're talking about!

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