Buy to let investors have been severely affected by the recent tax changes, which is leading many landlords to question whether buy to let investment is still viable.
Landlords will no longer be able to offset all their mortgage interest against rental income and only pay tax on the profit leftover. Instead the relief will be replaced with a 20 per cent tax credit against mortgage interest.
Unfortunately for buy to let landlords, the chancellor took an axe to interest relief and landlords are not required to pay tax on revenue not profit.
Profit to taxpayers who are 40 or 45 per cent tax payers will be severely affected by these changes.
These changes are being rolled out in gradual reductions to mortgage interest allowance each year up to 2020 and beyond. I'm sure that many landlords are unaware of how their profits could be eroded. It is evident that costs and regulations are increasing, along with various legisilitive changes too.
Another option is to sell your property fast, and cash in the property before the major tax changes take effect.
Jason Harris-Cohen of Open Property Group comments; "Landlords are really feeling the pinch of numerous changes over the last few years. With the increasing regulations and capital expenditure required to keep up with the regulations, one questions whether buy to let is still viable in the current economy.
With money incredibly cheap to borrow (albeit not easy), I feel that we could be at the top of the market. With less positive cash flow each month, a typical landlord would hope for capital gains. However history has shown since the last recession that the property market is not a one way train.
At Open Property group we speak to many landlords in regional cities who have owned property since 2004, who 12 years later have either negative equity or a neutral position. If they've had interest only mortgages, their rents have only serviced the debt and general expenses and therefore are left dissapointed with the result"
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