The next move in property is Commercial Investments!

Prior to April 2017, tax is payable on the net rental income after deducting allowable expenses including mortgage interest. This meant that landlords paying higher (40%) or additional (45%) rate tax could claim tax relief at their highest rate. However, from April 2020 tax relief can only be reclaimed at the basic rate (20%), whatever rate of tax the landlord pays. The rules are being phased in over 4 years commencing April 2017.

These changes have forced some landlords to get out of or reduce their involvement in what was once a profitable property investment market. Many investors have spent years dealing with property and the majority of them are reluctant to leave the market entirely which is why many are now switching from residential to commercial property. There are several financial reasons why this is proving to be a wise move …

Firstly, higher rate Stamp Duty on second properties does not apply to mixed use freehold commercial properties, (ie. a shop with a residential flat above) such as High Street, Maldon, or a complete building such as Station House, Station Road, Maldon.  Fenn Wright are currently marketing both these investment opportunities.

Secondly, instead of paying a flat rate of Stamp Duty, commercial buyers are charged according to each band of the property’s value. After the introduction of the second-home surcharge in April 2016, a buyer of a £500,000 buy-to-let would pay £30,000 in Stamp Duty, while a buyer of a mixed-use property would pay just £14,500 – a saving of over £15,000.

While straightforward commercial property might present an intimidating prospect for the casual investor, semi-commercial investments, such as a shop with a flat above represents a good middle ground. It’s a halfway house between commercial and residential investment.

Thirdly, tax relief is still available for landlords of mixed-use properties.

Fourthly, commercial leases are usually much longer than residential – with 3, 5 or 10 years being the norm and tenants are routinely obliged to keep the property in repair and to pay to insure the property.

Fifthly, yields or net income returns are generally higher than would be received for a residential property

If you have a Commercial Investment you wish to sell or you are looking to purchase a Commercial Investment please contact the commercial team on:

Chelmsford – James Wright

Colchester – Lewis Chambers

Ipswich – Alistair Mitchell