Ask the Expert - the taxing issue of mortgage relief

Here is our latest Ask the Expert column from our Director Neil Shaw - this time about the taxing issue of mortgage relief:

Q: As a landlord, I keep hearing about changes to the tax system; what does this mean for my tenants and I?

A: You’re talking about Government plans which will mean that landlords will no longer be able to deduct mortgage interest payments from their turnover before declaring their taxable income.

At the moment mortgage interest payments are just one of the expenses that landlords can deduct as a business cost. Others include insurance premiums, letting agent fees, and maintenance and property repair costs.

The changes are due to be phased in from next April (2017) to full implementation by 2021.

According to the National Landlords Association (NLA), more than 400,000 landlords who pay the basic rate of tax will be forced into a higher tax bracket although the final amount will depend on the landlord’s own personal circumstances and income from any other sources.

Of course, there are concerns amongst landlords and their letting agents about the impact on the Private Rented Sector (PRS) – not least the increasing cost of holding a property portfolio and potential rent rises for tenants.

According to the Residential Landlords Association (RLA), of which Chinneck Shaw is a member, a survey of landlords found that nearly a third were considering leaving the sector while more than half were thinking of reducing their investment because of tax changes.

The RLA, NLA and the Association of Residential Letting Agents (ARLA), of which Chinneck Shaw is also a member, are urging the new Government to rethink.

One suggestion is to amend the changes by applying the rules only to new loans written after April 2017.

We may find out more in the Chancellor’s Autumn Statement on November 23. In the meantime it is worth researching what the changes could mean to you, either as tenant or landlord.

Speak to a trusted lettings agent or advisor; the Portsmouth Property Association (PPA) is the best place to find reputable, well established and experienced local firms who can help in a wide range of ways.