13^th Dec 2017

Following the latest Budget, there is the general consensus of opinion that renters in London could be facing rent increases in properties that are owned by foreign buy-to-let investors because of the latest tax changes.

The autumn budget introduces a raft of tax changes that will affect overseas landlords from January 2018, as companies instead of being charged income tax on their rental income, will have to pay corporation tax.

Corporation tax does not have the same breaks as income tax and the new rule means that corporate taxpayers will not be able to claim the same level of mortgage interest tax relief, which they have previously enjoyed.

Aidan Sutton, partner at PWC, said: “Most big landlords are highly leveraged, so this could mean a very big bill. This will no doubt influence what they charge their tenants in rent, including thousands of London renters as well as business occupiers.”

Overseas landlords most affected by the new tax change will be those paying interest of at least £2 million a year whose portfolios will be worth £180 million and more.

Some property experts believe that because of the changes potential overseas BTL investors will be put off from investing in UK properties. Not only will they miss out on tax relief on their mortgage interest repayments they will now face the prospect of having to pay corporation tax on profits when selling their properties. Before the changes come into force, any non-UK resident company is not subject to capital gains tax.

Councils have now been granted the powers to be able to charge anything up to 100% extra council tax on empty homes.

John Collier-Wright, whose firm JR Capital represents Middle Eastern buy-to-let investors disagrees and said that in all likelihood this will not put off their clients from purchasing properties.

He said: "Property taxes here are much lower than most other countries, so an increase from £2000 to £4000 on an average home in central London won’t be a big deal… It’s just annoying."

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