Given the changes to the Buy to Let (BTL) tax regime announced in the Summer Budget, there will be the potential for increased future costs for both new and existing BTL landlords. Barclays continues to have a desire to support the BTL market by best serving the aspiring landlord segment who may be looking for a long term investment.

As a responsible lender, Barclays wants to ensure that our aspiring landlord customers can afford the increase in tax liability once these changes come into force.

With this in mind, from Monday 7 December the minimum rental cover required for all new BTL applications will increase.

What is the change?

  • The rental cover ratio will increase from 125% to 135% for all new applications
  • There are no other changes to the affordability calculation. The current affordability rate is remaining at 5.79%
  • All existing background BTL and Permission to Let mortgages will also continue to be assessed at 125% as part of the overall affordability calculation
  • Existing Barclays BTL customers looking to Rate Switch will be unaffected by this change

Why are we making this change?

  • It is expected that landlords may incur higher costs as a result of the tax change and therefore we are amending our affordability calculation to reflect this
  • The increase in the rental cover ratio will ensure we protect our new customers as they look to invest in BTL in the long term
  • Barclays has already changed the affordability criteria to enable applicants to use personal disposable income (including bonuses) to make up any shortfall in our rental cover calculation

What is the action I need to take?

  • We recommend that clients seek advice from their accountant or tax adviser if they have any questions regarding their individual circumstances on this tax change
  • Download our BTL guide for further information on the recent changes and what this means for your clients
  • Last applications under the old policy should be submitted prior to Monday 7 December
  • The online BTL affordability calculator will be updated to reflect this change

For further information on lending criteria please refer to woolwichintermediaries.co.uk.