Raised income tax thresholds could be good news for some buy to let borrowers

30 October 2018

The 2018 Autumn Budget boldly declared that austerity is coming to an end, whilst for buy to let landlords, it may have been a case of no news is good news. But it could also make borrowing easier for some.

Andrew Turner, Chief Executive at specialist buy to let broker Commercial Trust Limited, highlighted one positive note, for some landlords, from this Budget.

“Certainly there had been speculation beforehand, that the Chancellor might increase stamp duty on second homes, but in the event, these proved unfounded.

“There was very little mention of landlords at all and perhaps the most significant aspect of this Budget, was the raising of personal income tax allowances to £12,500 for basic rate and £50,000 for higher rate, from April 2019.

“This could represent good news for some landlords, who are borderline higher rate tax payers at the present threshold of £46,351.

“If these landlords suddenly find themselves in the lower tax bracket from next April, they might benefit from more generous borrowing calculations on some buy to let products.

“This is because some lenders apply less strenuous rates in their Income Calculation Ratio (ICR) assessments for non-tax payers and basic rate tax payers.

“This could result in some formerly higher rate tax payers being able to borrow more money on selected buy to let mortgage products, if they do drop out of the higher rate tax bracket into the basic rate.”