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2017 Tax Changes Already in Sight for BTL Landlords

Britain’s Buy-to-Let (BTL) investors are in for yet another influx of tax changes in 2017. But, as investors don’t tend to be the sort of people to sit back and let things happen, they’ve already begun to prepare for these new changes.

“After being at the sharp end of the Government’s need for more tax income over the past few years, many BTL investors already have new strategies in place for these new rules,” said Rent Guaranteed Specialist, Assetgrove. “After all, for some, the phasing out of tax relief, on top of other changes, could make a significant difference to their annual BTL earnings.”

The latest Buy-to-Let Britain report from financial services firm Kent Reliance, shows that some landlords began their own preparations for the 2017 tax changes during the first nine months of 2016. However, responses show most of that activity has taken place in the third quarter, between July and September. With this latest tax change due to be phased in from April 2017, many BTL investors are making sure they have plenty of time to organise their portfolio and business structure correctly.

According to the report, the creation of a limited company is the most common restructuring method investors have opted for. This option means that properties already owned by the investor can be sold or transferred to the limited company. When it comes to buying new properties, they will be purchased by the company – provided everything is in order.

There are other ways in which landlords can re-align their BTL portfolio and business to avoid falling foul of the new tax regime – transferring ownership of properties within their portfolio to family members. Some children, wives and other relatives have become home-owners overnight!

“While these could be described as a tax avoidance by some, before making any judgements, it’s important to consider exactly how important the Private Rented Sector (PRS) is to housing the UK’s population,” said Knightsbridge estate agent, Plaza Estates. “Not only have PRS landlords already borne the brunt of cost and tax-related changes, but, without them, the UK’s residential rental market would be much diminished.”

But, before you start thinking every BTL landlord is working to avoid paying taxes, less than half who have already taken action, or are planning to do so. Kent Reliance’s BTL Britain report shows that 48% of respondents don’t plan on making any changes as they wouldn’t benefit from doing so. This suggests, though, that it’s the landlords with the bigger portfolio’s – the ones doing the biggest service to the country’s renters – who have the most to gain from making some changes.

In the meantime, and despite the further Government assault on BTL investors, the survey also shows that the number of PRS properties is set to grow over the coming years. With the PRS already accounting for 19.8% of housing supply in the UK, it could become an even more important provider of homes.

“The lack of homes in the UK is no secret and nor is the feeling that the Government could look elsewhere to boost its tax take,” said Newington Green estate agent, M&M Property. “Perhaps it’s time the Government took the time to reassess just how important the UK’s BTL sector is, before planning new ways to balance its own books.”

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