Accord Mortgages has told brokers recent tax changes for buy-to-let properties are likely to have two "major implications" for landlords, possibly affecting profits and the completion of tax returns.
In an updated version of its tax guide sent to brokers on Friday (December 7) the lender warned the new rules, announced by chancellor Philip Hammond in the Budget, could have a significant impact on the yield landlords can expect from their investment.
Mr Hammond had announced lettings relief will be reformed so it only applies in circumstances where the owner of the property is in shared occupancy with the tenant.
This reform will apply from April 2020 and the final period for exemption will also be reduced from 18 months to nine months.
Jeremy Duncombe, director of intermediary lending at Accord Mortgages, said: "The tax relief which landlords benefit from will make a material difference to many customers so it is vital brokers are aware not only of the current rules but also the changes coming into force in April 2020.
"These could have a significant impact on the yield landlords can expect depending on their circumstances so informing them of the long-term picture is crucial."
Mr Duncombe said Accord’s updated guide was designed to help brokers navigate their way through the complexity of buy-to-let tax in an engaging way regardless of their level of experience in that market.
Changes to lettings relief is the latest in a number of tax and regulatory changes which have squeezed landlord profits over recent years.
The introduction of an additional 3 per cent stamp duty surcharge in April 2016 was closely followed by the abolition of mortgage interest tax relief for landlords, to be phased down to a 20 per cent flat rate in 2020, further pushing the limits of landlord profitability.
Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority's tightened underwriting rules.
Steve Olejnik, managing director at Mortgages for Business, said: "It’s good to see lenders updating the broker market in this way and for providing useful tools for advisers and landlords.
"Brokers should however always recommend that the landlords seeks tax advice from a qualified professional."
rachel.addison@ft.com
