Welcome to your November edition of the Fish Need Water newsletter!

Here’s what we’ve got coming up:

  • Guest Presenter and Industry Expert contributes to our newsletter with his mid October update.
  • Sell now for the best price!
  • Landlords: get to grips with the new mortgage rules
  • All the news you need to know.
  • Top tool: this month we’ve gone for something a little silly…

Richard Rawlings Guest Video



It’s a seller’s market – but not for long…

According to the latest stats, fewer properties are on the market right now compared to the past few months – and demand for those properties is high.

This is clearly great news if you’re thinking of selling your property: increased demand leads to increased prices, and it’s likely you’ll be able to get more for your property than you originally thought possible.

But (at the risk of sounding like a furniture advert) hurry!  Now’s the time to capitalise, because we’re increasingly hearing from landlords who are looking to sell up due to the new tax laws – which will lead to more supply in the market and may well dent prices.

And talking of landlords and tax laws…

Landlords: how much will the new rules cost you?

In our August newsletter – just days after George Osborne’s Summer Budget – we told you about the new rules around taxing buy-to-let investments which mean very bad news for anyone who uses mortgages to fund their property purchases.

Now that there’s more clarity around these changes, we thought we should give a full explanation of what’s happening – and most importantly, what to do about it.

In a nutshell, the change is that landlords won’t be able to offset their mortgage interest costs as an expense.  Instead, everyone (regardless of what rate of tax they pay) will be able to claim a relief equal to the basic rate of tax (20%).

It’s hard to work out from that nutshellised explanation what the practical impact on landlords will be.   So, we’ve prepared a worked example using a set of figures that represent a fairly typical Fish Need Water landlord client.

Our (fictional) client owns a property worth £350,000 which is generating a rental income of £18,000 per year (£1,500 per month).  He also has a full-time job paying a salary of £50,000.

He bought his property using an interest-only buy-to-let mortgage for 75% of the purchase price, with an interest rate of 4%.  This means that his annual mortgage payments come to £10,500.  He also has £3,000 of other landlord expenses such as our letting agency fee and some small maintenance costs.

As it stands, our client makes a profit of £4,500 per year.  He pays 40% tax on this amount, resulting in a tax bill of £1,800 and a post-tax income of £2,700.

So what’s changing?

When the changes come into full effect in 2020, he won’t be able to offset any of his mortgage interest costs as an expense before calculating his profit. Instead, he will be seen to make a “profit” of £15,000 (his £18,000 rent minus his £3,000 of costs), then claim mortgage interest relief of £2,100 (20% of his £10,500 mortgage payments).

This means that he will be taxed on the basis of 40% of £15,000 profit (£6,000), minus relief of £2,100, making for a final tax bill of £3,900.

In numbers…


Purchase price / property value: £350,000
Annual rental income: £18,000
Annual mortgage interest: £10,500 (4% at 75% loan to value)
Non-mortgage costs: £3,000

Pre-tax profit: £4,500
Tax at 40%: £1,800
Post-tax profit: £2,700

From April 2020:

Annual rental income: £18,000
Non-mortgage costs: £3,000

Pre-tax profit: £15,000
Tax at 40%: £6,000
Mortgage relief: £2,100 (20% of £10,500 annual interest)
Final tax bill: £3,900
Post-tax profit: £600

As a result of these changes, his post-tax income has fallen from £2,700 to just £600.

And things get even more severe when interest rates rise from their current historic lows.  If his interest rate increased by just 1%, he would still be cashflow-positive by £1,875 per year – but would pay more in tax than he makes in profit, resulting in an annual loss of £1,500.

Even though this seems only to affect higher-rate taxpayers, looking at the table above makes it clear that the way “profit” is calculated boosts your perceived income too – meaning even someone on a relatively modest salary might become a higher-rate taxpayer as a result.

What does this mean?

The new system is being phased in from April 2017 until April 2020 – meaning landlords will start feeling the pinch very soon, but have a few years to make preparations to survive the worst of the effects.  Moving property ownership into a limited company is one option (as the new regime only applies to individuals), but this comes with significant complications around stamp duty, capital gains tax and access to finance.

If you don’t agree with these changes make sure you sign the petition to get this reconsidered for debate.


As a landlord you might be looking at how to maximise the return on your investment, or even considering selling to lock in gains before the changes take hold. Either way, Fish Need Water can help with impartial and expert local advice: just give us a call on 020 3199 3492.

Property news

Ordinary old people are to blame for London’s home price surge — NOT the super wealthy. Pensioners are cashing in on record low interest rates and selling off their large homes for a lot more money than they paid. And what are they doing with that money? Buying up an awful lot of smaller properties with cash, apparently.

Transport for London picks 300 acres for property development drive. … And two-thirds of it is in zones 1 and 2.

London rises dramatically above New York in global prime property league. Something to be proud of? We’re not sure – but it’s certainly impressive.

First floor flats are most in demand – but carry a significant premium too. A 50% price premium, as it happens.

Our useful tool of the month

Terrible real estate agent photographs. This isn’t so much useful as very, very funny. Prepare to waste a few hours on this – and be sure to read the captions.

(Then, for a bit of contrast and because we can’t resist blowing our own trumpet, check out the quality of the listing photos we use!)

The end! (Until next month.)

We’ll be back in December with more advice, tips and gossip (we mean news).

Speak to you soon!