© 2019 Bluecoat Wealth Management

Decisions should not be taken based solely on the content of this website, individual advice should be taken first. Content is aimed at UK residents.

Bluecoat Wealth Management is an appointed representative of Best Practice IFA Group, which is authorised and regulated by the Financial Conduct Authority (FCA), FCA no. 223112. Registered Office: 11 Lady Bee Enterprise Centre, Albion Street, Southwick BN42 4BW. Registered in England and Wales no. 6828686. The Financial Ombudsman Service (FOS) is available to sort out individual complaints that financial services businesses and their clients are unable to resolve. To contact FOS please visit www.financial-ombudsman.org.uk

Please reload

Recent Posts

The current renewed volatility in financial markets is reviving unwelcome feelings among many investors—feelings of anxiety, fear and a sense of power...

Living with volatility

November 24, 2011

1/1
Please reload

Featured Posts

One more twist on buy-to-let

March 21, 2019

 

Buy-to-let investors will be hit by another notch up of the tax ratchet.

 

Source Nationwide

 

When George Osborne announced in his summer 2015 Budget a variety of tax changes aimed at discouraging buy-to-let (BTL) investment, they came as a surprise. To ease their impact, the then Chancellor phased in the most significant reform, a revised treatment of interest relief, over four years and deferred its start date to April 2017. Anecdotal evidence suggests some BTL investors did not know what had happened until they found a larger than expected tax bill in January.

 

April 2019 will see the start of the third year of the phasing process, which will mean in 2019/20:

  • Three quarters of any interest paid on BTL borrowing will be eligible for a 20% tax credit; and

  • The balance of interest is deductible from rental income, meaning it is fully tax relievable.

If that all sounds rather arcane, the impact becomes more obvious when you look at a simplified example. Suppose a higher rate taxpayer had rental income of £12,000 and interest on a BTL mortgage of £8,000. The investors’ net income position is as follows:

 

In practice, the situation might be worse than the table suggests if, for example, the disappearance of the deduction for interest increases the investor’s gross income to the point that it trips over the £100,000 threshold, at which the personal allowance is phased out.

 

Sales by BTL investors could pick up this year due to the interest relief changes and poor short-term prospects for capital growth. There is another tax incentive to sell on the horizon, too. From April 2020, capital gains tax on residential property (at 18% and/or 28%) will have to be paid within 30 days of sale, whereas the current rules effectively give a minimum of nearly ten months’ grace.

 

If you are a BTL investor and are considering leaving the market, please talk to us about your options, on both the tax planning and reinvestment fronts.

 

The value of tax reliefs depends on your individual circumstances.

 

 

Articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional. Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise.

 

Please reload

Follow Us
Please reload

Search By Tags