Timeline of regulatory changes affecting buy to let properties
We’ve summarised the key regulatory changes affecting buy to let properties, which have been introduced over the past two years by the government and Prudential Regulation Authority.
April 2016: Stamp Duty Hike on Second Homes
The government increased stamp duty by 3% for those buying second homes and buy to let properties.
April 2016: Wear and Tear
Landlords previously were allowed to deduct an annual allowance from their taxable profits for wear and tear. This allowance was permitted regardless of whether any improvements to the property needed to be made. From April 2016, landlords will need to provide itemised receipts if they wish for the costs to be deducted from their tax.
January 2017: Affordability Tests on Buy to Let Mortgages Get Tougher
The Prudential Regulation Authority (PRA), introduced tighter interest rate affordability stress tests. This resulted in lenders towards the end of 2016, increasing their rental cover which meant that landlords borrowing funds in their own individual name will face tougher stress test calculations and therefore the amount they will be able to borrow will be reduced.
April 2017: Mortgage Interest Tax Relief Cuts
Landlords previously could claim back a percentage of their mortgage interest costs, equal to the amount of tax they pay. Those who paid basic rate tax could claim 20% of the mortgage interest, however, those who paid the highest rate of tax could claim back 45%. George Osborne announced in the Summer 2015 Budget that starting from April 2017 all landlords will only be able to reclaim 20 per cent – regardless of the level of tax they pay. This change will be phased in over a four-year period.
September 2017: Portfolio Landlords
From 30th September 2017, landlords with four or more buy to let properties will be treated as portfolio landlords and will face tougher affordability checks. These will include landlords needing to submit more detailed supporting information; such as business plans, cash flow forecasts, bank statements, SA302s, tax returns, income and expenditure sheets etc.
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