Features
The man awarded FCA ’ s Personality of the Year with the company awarded Best Specialist Lender of the year is Roger Morris . The Director of Sales at Precise Mortgages talks us through taxation changes and the need for a restructure of the housing system .
By AMBER PRITCHARD
Roger Morris has been with Precise since the beginning and as Director of Sales for five years , not to mention being in the financial services business since the nineties . Precise is a specialist lender that supply a variety of products such as buy to let mortgages , bridging finance and second charge loans , available through a nationwide intermediary base . As Director of Sales Roger manages the teams across all lending areas , including specialist residential and near prime residential , to increase productivity and break lending targets . He also presents multiaward winning workshops which aim to up-skill and help brokers identify incremental market opportunities . Prior to his current role with Precise , the ex-fireman come mortgage advisor set up his own mortgage packager , Oryen , before progressing to em-financial , where he was taking in excess of a £ 100m p / m in applications . Roger discusses how new rules and tax changes have not yet affected Precise Mortgages : “ We quickly adapt and capitalise on these changes so for us business is up . I feel that in 18 months time we will have matured more and financially achieved even more .” Recent taxation changes come from the Financial Conduct Authority ( FCA ) as part of the Mortgage Credit Directive ( MCD ) rules . Changes in industry practice are also affected by Chancellor George Osbourne , whose introduced a series of short-sighted policies aimed at the property market . These include cutting back on tax relief for repairs and mortgage interest costs , all in a bid to raise revenue to help fund programmes such as the ‘ Help To Buy ’ scheme which supports first-time buyers . Prior to the stamp duty deadline last month Roger explained how March saw three times as normal many applications completed . “ This is most probably due to people reading and reacting to the changes so late . Landlords would of read this in the new year and make the most of it then , deciding to rent out their unrented houses before the new buy-to-let tax at 3 % comes in .” He described that since the pressure of the deadline and confusion over changes this month , there has been below-average completions due to the stamp duty taxes as most people don ’ t want to complete at 3 % there has been a knock on effect . To be specific , there has been a big drop in applications on the buyto-let market as a whole and transactions are currently down by 20 % in London . Roger added : “ The buy-to-let market has definitely changed and underwriting is going to change further . Landlords will need to provide more information and affordability tests will now be a key part of the buying process and well as rental yields .” The next issue of George Osborne ’ s shock tax change in 2015 meant he was going to tax landlords on their turnover rather than profit . With that in effect , landlords are unable to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax , the tax increase will be phased in up until 2020 , beginning next year .
Post April 2016 , investors can only deduct the actual costs of replacing furnishings in the tax year of replacement . As replacements are unlikely to take place each year , profits and tax will both rise . It will all start on April 6th 2017 when restrict relief for finance costs on residential properties from individual landlords will be met against the basic rate of income tax . These costs include mortgage interest , interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans . No relief is available for capital repayments on a mortgage or loan .
“ There is a demand for restructuring the housing supply , but whose going to do it ? Not the local authority , so it ’ s up to private landlords to make this housing more available .”
Deductions from property income will be restricted to : 75 % for 2017- 18 , 50 % for 2018-19 , 25 % for 2019-20 and 0 % for 2020-21 and beyond . Roger has his own advice to brokers , many of which he vocalises in his workshops , but for now his ideas to stay current with the changing rules from the Chancellor and the FCA are as follows : He believes borrowing through a limited company , such as Shawbrook or Interbay , could be the right thing to do as the limits on mortgage interest relief only apply to individuals . A Company will continue to pay tax on its profits , whereas an individual pays tax on their income and the rate of Corporation Tax is lower than for individuals dropping to 17 % by 2020 , from April 2006 the new Dividend Tax provisions mean that the first £ 5000 is tax free . Roger understands how important it is to understand every taxation change and regulation made : ” When an advisor is arranging a buy to let mortgage , they must understand the tax implications that this vehicle and product will give their customers , ultimately by 2020 . Limited companies are not the answer , but are part of a combined and considered solution .” Another issue is the lack of affordable housing for those unable to pursue a mortgage as well as the heightened levels of net migration . Roger , whom he has been a buy-to-let landlord for 28 years , said : “ People are going to need a place to live , there is an increase in single occupancy and there is a demand for restructuring the housing supply , but whose going to do it ? Not the local authority , so it ’ s up to private landlords to make this housing more available . We should be encouraging the private sector to buy again and again .”
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