Many commentators correctly predicted that the first few months of 2016 would see high levels of activity in the housing market.

The Council of Mortgage Lenders recently reported that the change in Stamp Duty Land Tax (SDLT) on second homes introduced at the beginning of April boosted activity, with the value of buy-to-let loans reaching £7.1bn in March – up by 142% on the figure for March 2015.


All of which means that for first-time buyers the next few months could be a good time to enter the market. They are less likely to find themselves in competition with buy-to-let investors for the same entry-level properties now that second homes face a 3% SDLT surcharge.

For example, someone purchasing a second home or buy-to-let property for £200,000 prior to 1 April 2016 would have paid just £1,500 in SDLT. Now, a landlord purchasing the same property would see their bill rise to £7,500.


That’s not all, mortgage interest relief is set to change from 6 April 2017. Landlords who have been able to claim tax relief worth 40% or 45% will find their relief restricted to 20% once the changes are fully implemented in April 2020. Currently, those with buy-to-let mortgages can deduct all finance costs in arriving at their rental income.

From April 2017 this will no longer apply. Instead they will receive a basic rate reduction from their income tax liability for their finance costs. In addition, from April 2017 the 10% wear-and-tear allowance will go and landlords will only be able to deduct costs they have actually incurred.

It’s generally expected that the buy-to-let market will be far less active as landlords take stock and look more closely at their income position once the new tax changes start to take effect.

However, with interest rates remaining low and investment markets showing increased volatility, would-be landlords may still decide that property remains a good investment choice for their money.

Some would argue that rents could continue to rise steeply, or that property values will continue to appreciate at the same rate as they have done over the last few years. However, it’s important for anyone thinking of entering the market at this point to do their sums carefully and be aware that house prices aren’t guaranteed to go on rising. Some buy-to-let investors are turning themselves into companies to mitigate the tax changes.

Clifford Osborne is a member of the Equity Release Council, a body established to promote safe equity release products and protect consumers.

If you’d like more buy-to-let advice from Clifford Osborne IFA, please contact us for a free initial assessment or meeting. Clifford Osborne offer financial advice throughout East Sussex and parts of Kent including Eastbourne, Lewes, Brighton, Tunbridge Wells, Hastings, Bexhill, Seaford, Newhaven, Crowborough and Uckfield. Our financial advice includes mortgage advice, equity release advice, investment advice and more.