George Osbourne’s attack on mortgage tax relief in the July budget left buy-to-let landlords reeling. But those same measures could prove profitable for House Crowd investors.
The first all-Conservative budget for 19 years contained many radical measures and many surprises, not least being the targeting of profits among BTL landlords.
From April 2017, BTL investors will be prevented from claiming tax relief at higher rates for interest payments on their BTL mortgages.
Instead, this will be pared back to the basic rate of income tax, i.e. a maximum of 20%, with the change phased in over four years.
Along with this serious dent to their profits, BTL landlords were dealt a second blow.
From April 2016, automatic claims for 10% rent on wear and tear costs will be halted. In its place will be deductions based on costs actually incurred.
Some property pundits are now forecasting a rise in rents as landlords bid to recoup lost profits. Such an upwards drive in rental yields will naturally benefit House Crowd investors.
And, if an alternative scenario occurs – BTL landlords sell up in their droves – this will similarly favour House Crowd investors with less competition for prospective tenants.
Better tax relief may still be possible for BTL investors by creating limited companies to purchase properties.
But doubts remain about securing favourable finance deals from lenders.
It was a budget, consequently, that hit one type of property investing hard – BTL property investors reliant on mortgage relief – but may prove handy for property investors with companies such as The House Crowd.
Investors in The House Crowd may also have been cheered by the chancellor’s shake up of dividend incomes.
All taxpayers are now entitled to a tax-free dividend allowance of £5000 per annum.