Owning a buy to let London property is about to become a whole lot more expensive for UK landlords. That’s because they’re about to lose their tax relief on landlord expenses. From April 6 it will be cut back – on a sliding scale – until 2020 when it will come fully into force.
UK landlords had already lost their automatic 10 percent tax relief for wear and tear last year, around the same time they were forced to pay stamp duty for every other property they bought.
Former Chancellor of the Exchequer George Osborne cut landlord tax relief
The sums showing UK landlords will miss out
The slashing of Landlord Tax Relief means investors will be taxed on their turnover from a property instead of just their profit (as at present). For example, someone who has a mortgage of £13,000 and receives £20,000 in rental income will only pay tax on the profit of £7,000. This works out at around £2,800. By 2020, however, when the ban on tax relief is fully introduced, the same landlord will have to pay tax on the full £20,000, making his tax bill double to £5,400.
This all makes a UK property investment in London and other major British cities far less attractive to UK buy to let investors – and gives foreign property investors and advantage.
Tighter money lending criteria for UK landlords
In January the Bank of England announced the Prudential Regulation Authority (PRA) had announced stricter lending criteria for banks and other finance institutions when it came to agreeing on lending for buy to let mortgages. The PRA advised that borrowers should either be able to show they stood to make 25 per cent profit from their UK property investment, or that they could afford their mortgage repayments were interest rates to go up by at least 5.5 percent.
Why buying UK property today makes sense for SE Asia investors
The new landlord regulations and laws are an attempt by the UK government to stamp down on the number of buys to let landlords. And it has convinced many long-time landlords to look elsewhere for investment opportunities (the ban on tax relief being the last straw for many). But demand still far outstrips supply throughout the UK where the government admit to a severe shortage in housing. This means there will always be people to rent housing, with very little change of void periods.
Another plus, particularly for SE Asia investors from the likes of Malaysia, Singapore, Hong Kong and China is that the UK currency has fallen, resulting in far more property for those investing from overseas. The British economy – and property in particular – is considered a safe haven to invest hard-earned savings in (especially while the domestic market at home in China, for instance, may be proving rather wobbly).
Having a foothold in London and outer lying areas also means the prospect of a UK education for family offspring or even somewhere for them to live during university. Better still; unlike in Australia and Canada, there are no high duties for foreign investors buying property in the UK.
Best areas to buy residential property in the UK
London property has become so expensive that many individuals and families can’t afford to rent there, never mind buy. This means the outlying suburbs (ie those within a good 30-minute commuting distance) are proving much more popular. Not only are commuting times for young professionals and those working in the city excellent, but rents more affordable and, in very many cases, there is the promise of good schools.
Esther in Surrey is just 27 minutes by train from London
Plenty of regions are benefitting from regeneration initiatives while the UK government has already begun a high-speed rail system set to improve connection times between the capital and a host of outlying towns, villages and cities in the UK. Then there is the healthy countryside air that young families crave. In short, the average UK citizen’s love affair with central London property is over. And so should yours be.
Want to know more? Then feel free to contact us here at UK Property Knowledge. We have been dealing in UK property investment for a number of years and are happy to offer advice and investment opportunities.