Steve Riley of Airedale Financial Solutions revealed that a loophole in rulings from the Inland Revenue had made it possible for buy-to-let property investors to claim tax relief on their properties as a result of remortgaging their
properties.
He said: “Buy-to-let investors are potentially able to make huge tax savings every year as a result of a loophole in Inland Revenue guidelines. If an investor buys a property and decides, at a later date when the property value has increased, to remortgage the property, they do not have to use the extra capital gained for any property purchases. This could be a massive deal for high net worth investors as they could remortgage their properties.”
He added: “I don’t think a lot of people know about the rulings, but it could save people a substantial amount of money in tax relief, especially if you have two or three properties that could be remortgaged.”
Riley referred to BIM45700 regulation from the Inland Revenue, which stated that if a borrower bought a property 10 years ago, at a value of £125,000, with an £80,000 mortgage and had decided to move; with the property price now £375,000; but retain the property as a buy-to-let investment, the borrower could renegotiate their contract to convert it to a buy-to-let mortgage, borrowing a further £125,000 which the borrower could then use for other means.
Alex Hammond, PR manager at Kensington Mortgages, admitted that property investors had often remortgaged in an effort to expand their property portfolio. He said: “People who purchased a BTL property a few years ago have relied on capital growth to fund further property purchases. Over the past few years there has been an increase in portfolio landlords.”
