Landlords and their accountants are untangling the impact of George Osborne’s tax changes on buy-to-let investors with mortgages in the Summer budget.
Those worst affected will see tax they pay on their investment potentially more than double.
All higher-rate taxpayers who own buy‑to‑let properties on which there is a large mortgage will pay substantially more tax.
The tax rate payable for some may rise above 100% of profit, a level of tax that pushes landlords into a loss. Critics are suggesting it will undermine the financial viability of the investment itself, forcing landlords to increase their rents – already dangerously high for some – or sell.
Some current basic-rate taxpayers will also be hit, because the change could push them into the higher-rate tax bracket.
Those who are worst affected will see the actual tax they pay on their investment doubled, or more. In addition, the tax rate payable will rise above 100%, potentially resulting in their profits, and even more, being paid in tax, pushing them into loss.
For high-end developers with enough un-mortgaged properties, the measures will make no effect, leaving current taxes on their portfolios unchanged.
Richard Dyson, writing in the Telegraph, said:
It is the parents who decide to buy a property for their child at university who will be hit; as will the newly married couple who decide to keep one of their two properties as an investment; as will the families who inherit a property on the death of a parent and decide to keep and let it.