Tag Archives: Property

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Tax changes to buy-to-let – how it will affect landlords

In the first all-Conservative budget since 1997, the Chancellor, George Osborne, announced the amount of tax relief that landlords will be able to claim on the interest of their mortgage payments will be reduced.

The changes mean property investors who currently claim top rates of tax relief of 40% and 45% will only be able to claim relief in the future at the basic rate of tax, currently 20%. Here David Treharne of Mortgage Advice Bureau discusses how this will affect landlords.

What is tax relief?

Tax relief is something that allows you to pay less tax so you can account for money you need to spend on things like expenses. It can also allow you to get tax repaid in other ways, such as straight into a personal pension.

As landlords, as your buy-to-let properties are classed as self-employed businesses, you are currently able to get tax relief and deduct some of your running costs from your taxable profit, so long as they are allowable expenses.

How will the tax rates change?

Under the new rules, landlords will not be able to deduct the cost of the interest on their mortgage from their rental income.

For example, currently, if your property earns £20,000 per year and the interest-only mortgage costs £13,000 per year, you will pay tax on the £7,000 profit. If you currently pay the higher 40% tax rate, this means you will pay £2,800 in tax per year.

Under the same circumstances in 2020, however, the full rental income of £20,000 will be taxable by 40%, if you fall under this tax bracket, meaning, after taking away the new basic-rate tax relief of 20% on your interest-only mortgage payment of £13,000 (20% of £13,000 = £2,600), you are left to pay £5,400 per year – an increase of 93%.

That sounds confusing. Will these changes be implemented over time to give landlords chance to adjust?

The withdrawal of the higher-rate reliefs will be phased in over a period of four years, in order to help landlords adjust to the lower relief level, and nothing will happen until April 2017.

It will then be implemented in four stages:

Stage one
From April 6th 2017, the higher-rate tax relief can still be claimed on the first 75% of your mortgage interest costs. The remaining 25% will have the basic rate of tax relief applied.

Stage two
From April 6th 2018, the amount of tax relief you can claim at the higher rates will drop to 50% of your mortgage interest costs. The remaining 50% will have the basic rate of tax relief applied.

Stage three
From April 6th 2018, the higher-rate tax relief can only be applied to 25% of your mortgage interest costs. The remaining 75% will be at the basic rate.

Stage four
From April 6th 2020, you will only be able to claim tax relief at the basic rate level.

If you have any furnished holiday lets, this restriction will not apply.

These changes will be published and are expected to be passed in the 2015 Summer Finance Bill.

How can you assess the impact these changes will have on you? 

There is still time for landlords to forward-plan so they do not have to suddenly increase rents. For any landlords currently investing in property, or considering expanding their portfolio, it is wise to speak to an independent mortgage adviser to discuss these changes. It is also worth talking to a property tax expert to see if there are any other tax breaks you could take advantage of.

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Dawsons shortlisted for award as Best Agent in South Wales

Leading estate agent Dawsons has been shortlisted by Relocation Agent Network, a national network of selected estate agents, for the 2015 Best Agent Award in the South Wales Region.

The winner will be announced at a black tie evening awards dinner held at the Park Plaza Riverbank Hotel, London on Friday, November 13th –an event being hosted by comedian Tim Vine.

The nomination comes on the back of Dawsons being crowned ‘Sunday Times Rental agent of the Year’.

“We are delighted to be shortlisted for Relocation Agent Network’s Best Agent Regional Award. It really does highlight the team’s effort, commitment and enthusiasm over the past 12 months,” said Dawsons Senior Director Chris Hope.

Relocation Agent Network’s 2015 Best Agent South Wales Region Award is an annual prize for the agent that has consistently made the best overall contribution to the Network throughout the year and offers nominees the chance to become the Network’s ‘Best Network Agent in the South Wales Region’.

To reach this stage of the award programme, agents must demonstrate excellent customer service, innovative business initiatives and a commitment to the Relocation Agent Network principles.

Richard Tucker, Relocation Agent Network’s Managing Director commented: “As a network of selected estate agents, made up of 16 regions across England, Scotland and Wales, our regional awards recognise those agents that truly demonstrate outstanding customer service and innovative business initiatives. Congratulations to Dawsons for their well deserved nomination.”

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From run-down house, to dream family home – one family tells their home story of a self-build project

We were so glad to hear from one of our families who bought a property from us and transformed it into their dream home. They saw potential in a small run-down house in the village of Pwll and began to convert it into their ideal home that ticked all of their boxes. Now they reflect on their journey through the whole process.

Elgin Road in Pwll, an area that wouldn’t first come to mind when searching for a dream home, is where our vendor found their “forever home” after exhausting the property market to no avail.

After what our vendor would describe as a moment of madness by her husband, the pair found themselves in a little village called Pwll facing an “old tiny run-down house.” Our vendor’s reaction was “why on earth would he bring me here?”, but her husband asked her to look beyond the house and there it was, a breathtaking view that sealed the purchase of this tiny run down house within just five minutes of being there!

This was the moment in which they decided this was the location for their dream home, and that they were going to build that dream home to match and to enjoy with family and friends.

The benefit of building your own home, according to our vendor, is that you can make your criteria ‘tick sheet’ a reality. Our vendor’s tick sheet was quite lengthy and included many factors that had prompted their plans to move, factors such as needing space for their three young teenagers to hang out with friends, whilst also wanting to be close to their ageing parents.

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Elgin Road is a home that offers something for all members of the family; it boasts generous room sizes and a self-contained living accommodation that’s ideal for a teenager or relative to live in. This is all without mentioning one of the main focuses of the build, the property’s outstanding views. The lounge and bedrooms have their own balconies where the family can sit out and admire the same view that convinced them to buy what they will always know as “the tiny run-down house”.

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The family are now able to enjoy a once unthought-of location that has links to the millennium costal path, beach walks for the dogs, and strolls to the local pub for a quiet evening meal and drink, all within just a five minute walk.

Has this family’s venture got you thinking about your next property?