60 per cent of landlords anticipate that they will be affected by the upcoming changes to income tax relief and the stricter mortgage affordability checks foisted upon them.
Results from the latest Property Investor Survey revealed that the majority of landlords felt that they would be affected by the changes, however a sizeable 29 per cent expected to feel no impact. However, those who are not affected are likely to be operating their portfolios through limited company vehicles subject to corporation tax, or merely basic rate income tax payers.
A further 11 per cent of landlords and investors are unsure as to how the shifting regulation will affect them.
CEO at Mortgages for Business, David Whittaker, said: ‘The percentages feel about right for the market in general and it’s certainly been a tough 18 months or so for landlords, so it’s encouraging to learn that the majority are getting to grips with changes that will dramatically alter the way they operate. We are still encouraging landlords who haven’t already taken professional advice on the matter to do so ASAP, as some may find that the new formula will tip them into the next tax bracket leaving them worse off. The new regime starts in April, so there’s not much time left to make strategic decisions and take action.’
Similar results were recorded regarding investor understanding of new Prudential Regulation Authority (PRA) guidelines on buy to let lending, again with 60 per cent of respondents claiming to understand the impact these will have on how much they can borrow. 25 per cent cited a partial understanding of the ruling, which means that from the 1st January 2017, buy to let lenders have to tighten their affordability calculations in correspondence with the increased tax burden being imposed on landlords borrowing personally.
As a result of this, many landlords are moving towards incorporation, with 32 per cent of those surveyed reportedly owning at least one property in a limited company, up 2 per cent on May 2016, proving the resilience of landlords and their commitment to adapting to market change.