Buy To Let Tax Change warning For Expat Landlords

One of the most popular buy to let lenders for expats is warning overseas investors in UK property to brush up on their tax affairs.

Skipton International, an offshore branch of a British building society, has launched a guide for expats explaining the latest tax changes.

The offshore lender has more than 900 buy to let expat customers who have taken out mortgages worth nearly £200 million since September 2014.

Executives are reporting that expat buy to let is booming, with inquiries soaring – for instance, British expat borrowing requests are up 124% from the United Arab Emirates, 118% from Switzerland and 162% from Hong Kong.

Preparing for change

Nigel Pascoe, director of lending at the building society, said: “There have been a number of measures over the past few years that have affected overseas investors who own UK buy-to-let properties. The phasing out of mortgage rate relief is likely to have an impact on some landlords so this is a good time for property owners to look into this in more detail and take professional advice where appropriate.

“Buy-to-let remains a popular long-term investment for British expats and we don’t expect the phasing out of mortgage interest rate relief to change this. The guide is a way of helping ensure expat investors are aware of changes in the UK, so they can prepare for them.”

The guide looks at how changes in mortgage interest tax relief for higher rate taxpayers impacts overseas landlords.

Calculating rental profits

The rules for claiming mortgage interest relief for higher and additional rate taxpayers changed in April 2017. Over the next three years, relief will reduce by 5% a year to a universal 20% for all landlords – this year the rate is 35% for high rate taxpayers, falling to 30% in 2018-19 and 25% in 2019-20 before settling at 20% the following year.

The formula for calculating taxable profits for rental property also changed at the same time.

Instead of deducting mortgage interest relief from rents together with other business costs, interest relief is excluded from calculating the gross taxable profit and a tax credit to cover the amount is applied.

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