Budget signals changes for Buy to Let landlords

09 Jul 2014

The Chancellor’s recent budget has cut tax relief on mortgage payments for buy-to-let landlords to just the basic rate of tax which will signifantly impact landlords paying higher rates of tax.

And with interest rates looking set to rise in the next couple of years as signaled by the Governor of the Bank of England, this could significantly reduce the return for landlords.

Phil Nicklin, real estate tax partner at Deloitte, said: “This measure will almost double the effective cost of borrowing for a taxpayer on the highest rate of tax. Currently interest payments of £100 only cost £55 after tax relief, but will cost £80 from 2020. A landlord who borrows at even a modest level might end up paying more in tax than he makes in profit.”

The Telegraph has published a handy guide for landlords on ways to reduce your exposure.

But there is good news on the inheritance tax front, with the threshold rising to £500,000 per person. So if you own a property worth up to £1m you will be able to leave it to children or grandchildren completely free of inheritance tax from April 2020.