LANDLORDS come in many shapes and sizes. All of them need landlord insurance and The Property Insurer will save them all money if they get a quote. We have a price guarantee in place to beat any like for like quote and that is as good as it gets for insurance.
So while landlords and insurance can get on very well at the Property Insurer, with everyone saving money, it is not the same when it comes to the new 2015 summer budget tax proposals. In this case, the wealthiest landlords will not be affected and anyone with a mortgage on a let property is going to be hit hard.
Regardless of how much you save on your landlords insurance, the amount of tax you’ll pay on your mortgage costs could mean being a buy to let landlord is no longer viable for you.
Basically where you could earn the rent you charged and then deduct the costs of the mortgage to come to a profit figure, this has been completely changed from 2017 onwards. Your mortgage costs are no longer seen as costs and will be taxed as though a profit.
So if you earned £10,000 in rent and had £7500 in mortgage costs, you made a £2500 profit in the past. You were then taxed on the £2500 profit, which is all sensible and reasonable. At 40% that is £1000 tax.
Now under the same numbers, you’ll be taxed on a £10,000 profit regardless of costs. That is £4000 tax at 40% or a 400% increase in tax. Indeed, in real terms it is a £1500 loss, as you will pay all the traditional profit and an extra £1500 to the taxman just to own the properties.
The irony is that if you own a property outright, then there is no tax on the finance costs as there aren’t any. Your position remains unchanged and the wealthiest landlords are unaffected. It is the landlords with mortgages that will be hit the hardest.
So my advice is that if you have a mortgage of any kind on buy to let properties, start thinking about whether you can afford to stay in the game. My own solution is to raise rents, I cannot afford to sell or pay the capital gains tax and redemption fees to lenders.
But regardless of your tax position, remember that The Property Insurer can save you money on your landlord insurance and that at least is a little bit of welcome news.