A cap has been placed on the amount landlords can claim on mortgage interest payments, in a decision that the Treasury says will "create a more level playing field between those buying a home to let and those buying a home to live in".
Previously those buying a property for the purposes of letting it out could deduct numerous expenses from any rental income they receive on renting out the property. These expenses include any mortgage interest; this is the case whether or not the buyer has taken out an interest-only mortgage or a repayment mortgage.
However, under the new rules, which will be introduced over a four-year period from April 2017, the amount landlords can claim as relief will be capped at the basic-rate of tax, which is 20%. At the moment, landlords are able to claim tax relief on their mortgage interest payments at the rate of tax they pay. This means that if they're a higher-rate taxpayer they are currently able to get 40% tax relief on the mortgage interest they're paying. Under the new rules this will be restricted to 20% – the equivalent of the basic rate tax – regardless of what rate of tax they're paying.
People buying additional property, including buy-to-let or second homes, will face a 3 % surcharge on stamp duty rates from April 2016.
The tax increases will apply to any additional residential property costing more than £40,000. You won’t pay the extra 3% if the property you’re buying is replacing your main residence and that has already been sold. If there’s a delay selling your main residence and it hasn’t been sold on the day you complete your new purchase, then you’ll have to pay higher rates because you own 2 properties; however, you may get a refund if you sell your previous main home within 36 months.
If you are purchasing any properties jointly with other people and any of them already own one or more properties, you’ll need to pay the higher rates. If you’re married or in a civil partnership, buying a property and your spouse or civil partner already owns a property you may still be liable to the higher rates. But you may be able claim a refund if they then go on to sell it.
New Second Property Stamp Duty Rates
PURCHASE PRICE OF PROPERTY
Up to £125,000
Over £125,000 and up to £250,000
Over £250,000 and up to £925,000
Over £925,000 and up to £1,500,000
RATE PAID ON PORTION OF PRICE WITHIN EACH BAND
All broker fees will be wavered where possible and we will do all we can to provide not just a mortgage with a competitive interest rate but also one that offers excellent value for money when taking into account all the costs and charges.
We will save you valuable time and money by providing a fast and efficient service with direct contact to our advisers and support staff. No need for you to trawl the Internet or sit in lengthy meetings with various lenders, we can quickly do all the necessary research.
Those of you that may not currently be looking to purchase but are property owners, can register their mortgage renewal date with us and we will contact you in good time to review your options with your current lender as well as the others.
Some of the detail in this article has been taken from www.gov.uk and is written without prejudice and for information purposes only.