New stringent new rules for mortgage lending to buy-to-let investors with multiple properties could mean that some can no longer borrow to fund their business. Former Chancellor George Osborne unveiled a shock tax change in 2015 that will remove landlords’ ability to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax.
The Bank of England may be preparing to warn both investors and regular Brits that they cannot expect interest rates to stay as low as they are forever, and that further rises in inflation in the coming months could lead to rising rates. The bank's Monetary Policy Committee will meet this week, and while it is highly unlikely that it will announce any changes to its key policies meaning a base interest rate of 0.25% and a quantitative easing programme capped at £435 billion the Bank's tone could shift substantially.
An FCA consultation paper has set out plans to reintroduce retirement interest-only mortgages, which were redefined as lifetime mortgages after the implementation of MCD. The FCA says it "has identified a regulatory barrier to a form of mortgage lending that could meet the needs of some older borrowers", including those with maturing interest-only mortgages and no repayment vehicle, and those seeking to release equity from their homes without the cost of interest roll-up.
Where a property is rented out, any rental income (less certain deductible expenses) is subject to income tax on the part of the owner of the property. For this purpose, it is the beneficial (not legal) owner(s) who are so liable. Normally, the legal owner(s) will also be the beneficial owner(s), but this is not always the case. In addition, any capital gain arising on sale will be subject to capital gains tax (CGT) on the whole gain; however, if the property has been lived in as the individual’s sole or main residence and also let out during ownership, part of any capital gain will be exempt from CGT and part will be subject to CGT (although lettings relief is also likely to reduce the taxable part of the gain, possibly to nil).