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900,000 landlords face buy-to-let tax

900,000 landlords face buy-to-let tax

Out of 1.4m landlords in the UK, only around 500,000 have registered.

Banks warned they face tough scrutiny over the loans they dish out.

Those who have not registered now face being quizzed and hit with bills.

They could be charged for interest on the mortgage and upkeep.

Landlords and second home owners face a crackdown as concerns grow over the boom in buy-to-let mortgages.

As many as 900,000 owners of a rental property, holiday let or second home could be probed by the taxman over claims they have not declared profits they have made.

And banks have been warned they face tough scrutiny over the landlord loans they dish out. This could limit the loans being granted.

The number of buy-to-let mortgages has boomed in recent years. According to the Council of Mortgage Lenders there are now 1.57million – an increase of 120,000 in the past year.

But although there are an estimated 1.4million landlords in the UK, only around 500,000 have registered with HM Revenue & Customs.

The estimated 900,000 who haven’t registered now face being quizzed and, in the worst cases, being hit with bills for undeclared income.

Someone who owns a second home has to pay tax on the profit from renting it out.

They can deduct expenses such as interest on the mortgage and upkeep. Income tax is charged at their highest rate – 20 per cent for a basic rate taxpayer.

Accountancy firms have reported that landlords are being targeted. It is thought many have failed to pay the correct tax and owe the Government around £550million a year.

The buy-to-let boom is thought to have been spurred on by asset-rich homeowners hoping to cash in on fast-rising house prices.

While many first-time buyers and families struggle to pass tough new mortgage rules, existing landlords and older homeowners are able to snap up homes.

This has caused prices to rise further and sparked concerns that many are taking on loans they cannot afford to repay should interest rates rise.

When ordinary homeowners want a mortgage they have to go through a strict affordability test.

These loans are regulated by City watchdog the Financial Conduct Authority.

But buy-to-let loans are unregulated and borrowers don’t have to pass such tough rules. Provided they have a good deposit they can take on loans based on the estimated income they will get from the property.

The Council of Mortgage Lenders warned that the Bank of England was scrutinising decisions about landlord mortgages. Bank governor Mark Carney said this week that he was ‘looking closely at buy-to-let’.

Tough new rules to come soon from the EU are also expected to help put the brakes on the amount banks are willing to lend buy-to-let investors.

Source: Daily Mail


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