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Three ways to cope with losing buy-to-let tax relief'

Tuesday, February 21, 2017 11:40:00 AM

If you have bought buy-to-let properties as an investment, you are likely to be feeling like someone has got it in for you! Initially the budget slashed tax relief, and following this there was the added blow if an increase in stamp duty costs, all of this hitting your profits!

These changes have definitely hit our buy-to-let customers who are now having to work a little smarter to ensure they maximise their investment returns.

In previous years' people with buy-to-let mortgages have been able to claim tax relief on their mortgage payments at a marginal rate of tax, of between 20 and 45% depending on whether you were a basic or higher rate tax payer. The new changes mean that tax relief will be a flat rate of 20%, so those on higher incomes will be losing more in mortgage interest payments.

The answer to this isn't to hike up rents to compensate as most tenants are already paying as much or more than they can afford. The advice we would recommend our clients to consider is:

1. Consider a shorter-term fixed rate deal to get lower rates of interest, but be aware these mortgages carry more risk.

2. Consider placing your property portfolio in a limited company structure. This would then allow you to pay corporation tax rather than income tax (corporation tax is lower). The drawback to this is mortgages might be harder to find as fewer lenders will loan to a limited company.

3.  Transfer the houses into your spouse's name if they pay a lower rate of tax. Be aware though that this doesn't lift them into a higher tax bracket.

As with most situations there are also benefits for buyers with these changes taking place. Landlords with lower incomes are now at less of a disadvantage to those larger landlords when looking to invest. Homebuyers might also find houses a little more affordable and more properties available as competition from buy-to-let investors decreases a little.

If you are a buy-to-let landlord looking for advice on this matter, please feel free to contact us to arrange a meeting to discuss your situation and see how we can help you maximise your return on investment.

To contact us please call us on 0333 340 8888 or email

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