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Coping With Losing Buy To Let Tax Relief

Coping With Losing Buy To Let Tax Relief

How to cope with the new changes

If you own properties you must be wondering how you are going to cope with the tax implications for buy to let properties. From next year you could be hit hard, so how do you cope and what are your options?

Tax relief on mortgage interest for buy to let properties has been slashed to a flat rate of 20%. Landlords paying the basic rate of tax will see no changes, but those on higher incomes will find themselves paying more in tax. The Nationwide Building Society have predicted that someone with a £150K buy to let mortgage on a property worth £200K and a monthly rent of £800, would currently have a net profit of £2,160 a year. Under the new system the net profit would plunge to £960.00.

So what’s the answer? Firstly landlords could switch to a shorter-term fixed rate deal to get a lower rate of interest. However these mortgages carry more risk. Secondly landlords can put their property portfolio in a limited company structure. This would mean paying corporation tax on the profits rather than income tax, which is much more tax efficient. Thirdly you could transfer ownership to your spouse if they pay a lower rate of tax.

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