Buy to let has long been providing bumper returns for investors, but the plan to withdraw mortgage interest relief will result in higher tax charges and diminishing profit from April next year.
The new rules, initially announced in the Chancellor’s Autumn Statement, mean that individuals will no longer be able to deduct the full value of their mortgage interest costs from their taxable profits. When the phased changes take full effect in 2020, mortgage interest relief will be capped at 20%, a significant change for any higher, or additional rate tax payers.
Since this announcement there has been a sharp increase in applications for buy to let mortgages from limited companies. Properties owned in this way can still get mortgage interest relief and as a result will only pay tax on their rental profit, minimising the effect of the imminent changes in many cases.
Simon Butler, Associate Director for Contractor Mortgage Made Easy commented: “Many of our clients are familiar with the concept of utilising limited companies as a method of maximising tax savings. To use a limited company to purchase an investment property would therefore be a sensible option to escape higher tax bills for many contractors.
“We have developed a number of products with our lending partners aimed at contractors who would like to protect existing property, or those who are looking to purchase a new buy to let. To avoid facing a tax hike that starts coming in from 2017, contractors need to plan sooner rather than later.”
Article By: Ratchelle Deary at Contractor Mortgages Made Easy
Media Contact: Ratchelle Deary, Public Relations Manager
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