Buy-To-Let Landlords Can Beat Budget Loss

Private landlords facing a cut in their income after tax breaks were scaled back in the Government’s summer budget could make good their losses by turning their rental activities into a business.

This advice comes from tax expert Owen Kyffin, who is also a director of Banbury based accountants Whitley Stimpson, the largest independent accounting company in the M40 corridor.

The Chancellor of the Exchequer slashed the tax relief that landlords in the top brackets receive on their mortgage interest payments, cutting it from the high tax bands of 40 and 45 per cent, to 20 per cent by 2020 on the grounds that it was unfair that buy-to-let landlords should receive this tax perk while owner occupiers did not.

Owen said: “If the rental property is run privately and the owner does not get tax relief for expenses he or she could pay tax even if they were not making a profit. By 2020 interest rates could be higher, which could make it even worse for a private landlord in the higher tax brackets.  

“However if the owner was in business with a partner and they have more than one property they could be better off by running their buy-to-let properties as a company. There would be a big difference when it was time to sell.

“It is a difficult one and buy-to-let landlords ought to be taking advice on the matter.”

Owen said it was important to get the matter right because the popularity of the buy to-let market has been intensified by the pensions freedom initiative that came into force in April this year, which enabled people to take their pension in a lump sum. Many people are choosing to sink their money into rental property and the private rental sector is now a significant slice of the housing market.

Specific advice is available from Owen Kyffin on 01295 270200 or by email at owenk@whitleystimpson.co.uk