Skip to content

The thinking behind the money...

Pembroke Financial
The Thinking Behind the Money
Pembroke FinancialPembroke Financial

01273 774855 / 01444 405160
Client Login
  • Home
  • About Us
    • Meet the Team
    • In The Press
    • In The Community
  • How We Work
    • Protecting Your Personal Information
  • Our Services
    • Pensions Advice & Retirement Planning
    • Active Money Management – Savings & Investments Advice
    • Tax Advice & Tax Planning Services
    • Mortgage Advice
    • Life, Health & Corporate Insurance
    • Business Solutions
  • Resources
  • Blog
  • Contact Us
    • How to find us
Client Feedback
  • Home
  • About Us
    • Meet the Team
    • In The Press
    • In The Community
  • How We Work
    • Protecting Your Personal Information
  • Our Services
    • Pensions Advice & Retirement Planning
    • Active Money Management – Savings & Investments Advice
    • Tax Advice & Tax Planning Services
    • Mortgage Advice
    • Life, Health & Corporate Insurance
    • Business Solutions
  • Resources
  • Blog
  • Contact Us
    • How to find us

Buy-to-let investors took a hidden hit in the Autumn Budget

Buy-to-let investors took a hidden hit in the Autumn Budget

Chancellor Philip Hammond’s Autumn Budget contained more bad news for many buy-to-let investors which went largely under the radar.

Next April will see the next step down in mortgage interest relief for investors in buy-to-let (BTL) residential properties when the amount of interest which can be offset against rental income drops from 75% to 50%, with a corresponding increase to 50% in the element that qualifies for a 20% tax credit. So, if you pay tax at more than the basic rate that means more interest on which you effectively receive only 20% relief, rather than 40% or 45%. It might well also mean an increase in your gross income, which could trigger other undesirable tax consequences, such as a phasing down, or out, of your personal allowance.

Jill Rickson, Principal Mortgage Adviser, Pembroke Financial IFA's

Jill Rickson, Principal Mortgage Adviser at Pembroke Financial Services of Shoreham says “What we have seen is that the mortgage interest changes have encouraged BTL investors to buy new properties via specifically established companies, sometimes transferring existing properties into that self-same company. However, using a Company to hold Investment property can create a double capital gains tax charge – once in the company and a second time on the shareholder. So far, the impact of this has been abated by the fact that Corporate capital gains still benefit from indexation relief. That relief means only gains above inflation which in this case is measured against on the more favourable Retail Prices Index suffer corporation tax, currently at 19%.”

As the example shows, even when inflation is relatively low, indexation can provide a real tax advantage.

The benefit of indexation relief

In February 2010, the Bloggs Property Company Ltd bought a flat for £200,000, including costs. Seven and a half years later the company sold the property for £257,000 net of expenses – a rise roughly in line with the performance of the Nationwide House Price Index. The RPI increase over the period was 25.3%, meaning the company had to pay corporation tax on a net gain of only:

£257, 000 – £200,000 x 1.253 = £6,400

Jill says “From January 2018, RPI indexation will be frozen at the December 2017 level, exposing all future gains to tax. HMRC said in the policy paper on the change that ‘This measure has no impact on individuals or households as it only affects companies’, but clearly individuals who have been driven to use companies for their BTL investment will be affected. As if that were not enough, the proposed Stamp Duty Land Tax (SDLT) exemption for most first-time buyers outside Scotland will also hit BTL investors competing to buy lower-priced property. On a typical £250,000 purchase, the first-time buyer will pay no SDLT, while the BTL investor faces an SDLT bill of £10,000 – whether buying personally or via a company.”

Please contact Jill on 01273 774855 or email us by clicking here for further mortgage advice or if you have the sense that the government is tilting the scales ever more against your BTL investment, then why not talk to us about other investments that are less heavily taxed?

 

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.  Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Share on Facebook Share
Share on TwitterTweet
Share on LinkedIn Share
By Keith RelfDecember 12, 2017
Tags: buy to let investmentsinvestmentsautumn budget 2017buy to let
Share this post
Share on FacebookShare on Facebook TweetShare on Twitter Share on LinkedInShare on LinkedIn Share on WhatsAppShare on WhatsApp

Author: Keith Relf

Founder & Managing Partner | Blog Archive | Biography

Post navigation

PreviousPrevious post:Why buy financial advice and who to buy it from?NextNext post:NS&I increase interest rates and lower the odds of winning.

Related posts

a woman looking at investments on her phone
Women are investing earlier than men, and it could close the wealth gap
August 9, 2022
Taking care of your investments - Rate hikes and recession warnings
Taking care of your investments – Rate hikes and recession warnings
August 8, 2022
A close-up of leaves growing with sunlight in the background.
ESG investing faces “greenwashing” criticism, but it could be a good thing for the sector
July 12, 2022
A woman smiling and holding up a house key.
Do you have a poor credit score? It doesn’t mean home ownership is out of reach
June 17, 2022
An estate agent showing a couple around an empty home.
8 useful questions to ask when you’re viewing a property
June 14, 2022
A group of people with their arms around each other laughing.
Young investors are championing the “S” in ESG investing, so what does it mean?
June 10, 2022
Someone standing outside their front door wearing yellow wellies.
The 3 different types of mortgages and what they mean for your interest rate
May 27, 2022
A woman showing her mum something on a tablet.
3 useful mortgages you can use to help your child get on the property ladder without gifting a deposit
May 24, 2022
Two people reviewing financial data and graphs.
Investment funds: How do they work and how they could play an important role in your portfolio?
May 17, 2022
hand holding key with keyring shaped like a house.
What is a mortgage in principle, and how can it help prospective buyers?
April 26, 2022
6 insightful figures that highlight the challenges first-time buyers are facing
April 22, 2022
A person using a watering can.
Half of workers would choose a “green” pension and it could lead to ESG investments soaring
April 15, 2022
A woman depositing a coin into a piggy bank.
Why it pays to use your 2022/23 ISA allowance right now
April 12, 2022
A shopper using contactless payment to pay.
Your older pensions could be delivering “poor value for money”, and it could cost you thousands of pounds
April 8, 2022
Categories
Recent Posts
  • 7 essential money lessons your children need to know before they go to university
    August 12, 2022
  • a woman looking at investments on her phone
    Women are investing earlier than men, and it could close the wealth gap
    August 9, 2022
  • Taking care of your investments - Rate hikes and recession warnings
    Taking care of your investments – Rate hikes and recession warnings
    August 8, 2022
  • 5 crucial things you need to consider when reviewing your estate plan
    August 5, 2022
  • 5 important things to check this Pension Awareness Day
    August 2, 2022
Testimonials

Would highly recommend!

Paul and the whole team at Pembroke were so friendly and helpful throughout the purchase of our first property. Paul was happy to answer all my questions and explain the process which was great as it can be confusing when you are a first time buyer. Would highly recommend! Thank you Pembroke Financial Services!

Courtney Guy

Orchestrating gains amidst turmoil!

I just received the review and haven’t read it yet but am extremely pleased with the results over the past 6 months on my account – especially in view of the pandemic and crazy, constantly evolving economy we are experiencing recently. Many thanks and congratulations to you and the team for orchestrating gains amidst turmoil!

Kate

A personal and professional service

I’d like to take this opportunity to thank you for the personal and professional service which is much appreciated

Trevor Meeking
Contact Us
Shoreham: Marlborough House, 102-110 High Street, Shoreham-by-Sea, West Sussex BN43 5DB.
Phone: 01273 774855
Email: advice@pembrokefs.co.uk

Staplefield: 1 The Forge, Cuckfield Road, Staplefield, West Sussex RH17 6ET.
Phone: 01444 405160
Email: theforge@pembrokefs.co.uk

Facebook