Strangle The Supply, Throttle The Treasury
Tuesday 29th November 2022
By Patrick Bullick
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WOW. What times we live in……
We have had a fun few months.
Lots going on - some of it good.
Our team has been very busy for a variety of reasons but in particular, letting properties and advising our landlord/clients with mortgages on their lettings stock.
Quite a few are considering selling.
The root cause for this is Gordon (George) Osborne’s removal of the ability for private landlords to offset mortgage interest before tax. The Treasury had been itching to strangle private landlords for ages and despite being a Tory Chancellor, he succumbed. Paying the interest out of taxed income still worked (just) when interest rates were very low but now that they have risen (doubled), the real net/net income to private landlords with mortgages has become negligible. Some are even subsidising tenancies.
Interestingly, this comes at a time when the shortage of properties available has pushed up rents significantly and in turn rental yields. Strangling the supply exacerbates the shortage and rent increases.
Unfairly, to private landlords, corporate landlords are still able to offset their loan interest payments against tax. So, it makes more sense these days to hold a letting property in a company name. However, it is expensive (Stamp Duty in particular) to transfer into a corporate ownership structure.
This is an opportunity for new landlords to come into the field, taking advantage of the higher returns. Buying in cash or in a corporate structure with debt are the two best ways.
‘Corporate structure’ makes it sound very complex but it isn’t really. Small off-the-shelf companies can be used but mortgage debt will likely have to be guaranteed by the directors.
See here a link to a couple of buy to let opportunities in Chelsea.
https://www.stanleypropertylondon.co.uk/sale/167_britten-house-sw3
https://www.stanleypropertylondon.co.uk/sale/171_knights-house-hortensia-road-sw10
These topics are complex by nature and the solutions vary from person to person.
I will be delighted to discuss your circumstances/hear your views.
Do call me on 020 7352 9556 or email patrick@stanleypropertylondon.co.uk
I look forward to talking soon.
Until next time….
PB
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