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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