Buy To Let

Purchasing a property as a long term investment or coming to the end of an existing deal, or even adding additional properties to your portfolio. It is therefore important that you know what your choices are and what is available to you.

From 1 April, new lets and relets with an energy performance certificate (EPC) rating of ‘F’ or ’G’ cannot be rented out, and existing tenancies have until 1 April 2020 to upgrade their EPCs. Any landlord letting a property that fails to meet the standard required could face a penalty of up to £4,000.

 

Let property campaign: your guide to making a disclosure

The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

If you’re a landlord and you’ve undisclosed income you must tell HMRC about any unpaid tax now. You’ll then have 90 days to calculate and pay what you owe. This guide explains how you can do that.

For more details and guidance “Click Here”

From 1 April 2018, new regulations state that Landlords, in England and Wales, who lease domestic properties must have a minimum performance rating of E on an Energy Performance Certificate (EPC). The new law, which has been put in place to reduce energy bills and reduce emissions also restricts Landlords from letting a property or renewing an existing tenancy if the rating is below E.

In 2020 all properties with existing tenants will also need to be E or above too. If the rules are not followed, there could be civil penalties, if the minimum requirement isn’t met.

 

Mortgage activity in the UK buy-to-let sector has halved since the introduction of a stamp duty surcharge, figures show.

Since April 2016, anyone buying a buy-to-let property or a second home has had to pay a 3% stamp duty surcharge.

Some 71,100 loans were advanced for house purchases by landlords in the year since the tax change, the Council of Mortgage Lenders figures show.

This compares with 142,100 loans in the previous 12 months.

To read more on the BBC Website Click here

 

Limited companies not exempt from 3% Stamp Duty: Budget 2016

In a shock move, a policy statement supporting the 2016 Budget confirmed investors buying residential property inside a limited company tax wrapper will still be hit by the 3% surcharge.

In a bid to sidestep the 3% premium, thousands of landlords have been placing residential property investments into limited company shells since the consultation was announced in the Autumn statement last November.

Today, the government confirmed only properties worth less than £40,000 along with houseboats and caravans will be exempt the surcharge, regardless of tax wrapper.

Chancellor George Osborne said in his speech, larger landlords would not be exempt the extra charge with many previously speculating that landlords with 15 or more properties may be exempt.

However, today’s policy statement quashed all speculation and said: “Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property.”

Buy-to-let landlords and people buying second homes will soon have to pay more in stamp duty, the chancellor has announced.

From April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band.

George Osborne said the new surcharge would raise £1bn extra for the Treasury by 2021.

Landlords reacted angrily to the change, saying it would “choke off” investment in rented properties.

Other changes announced by the chancellor included an extended Help to Buy scheme in London, and more money for the Starter Homes programme.

‘Choke off investment’

The stamp duty surcharge will lift each band by 3%. That means that for properties worth between £125,000 and £250,000, where the stamp duty is 2%, buy-to-let landlords will pay 5%.

For the average buy-to-let purchase of £184,000, that means they will pay an extra £5,520 from April 2016.

Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges.

Stamp Duty Rates (on purchases)
Property value Standard rate Buy-to-let/second home rate (April 2016)
Up to £125,000 0% 3%
£125 – £250,000 2% 5%
£250 – £925,000 5% 8%
£925 – £1.5m 10% 13%
over £1.5m 12% 15%
Source: HMRC

Buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules.

From April 2019, they will have to pay any CGT due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.

Landlords are already due to get a lower rate of tax relief on mortgage payments.

In his summer Budget, the chancellor said that landlords would only receive the basic rate of tax relief – 20% – on mortgage payments, a change being phased in from 2017.

Responding to the latest changes, Richard Lambert, chief executive of the National Landlords Association said: “The chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent.

“If it’s the chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so”.

Up to £60m of the money raised from the stamp duty surcharge will go to help home-buyers in England in places where holiday homes have forced up local prices.

www.bbc.co.uk/news/business-34922738

 

Mortgage brokers with buy-to-let clients who intend to use their property as part of their pension plan are being urged to recommend they take out a Lasting Power Attorney (LPA) before retirement age.

A Lasting Power of Attorney allows an individual to appoint a third party, known as the attorney, to make financial, property, health and welfare decisions if they are no longer capable of doing so.

Buy-to-let property owners should be using a property and financial LPA even if they use an agent to manage their portfolio and do not need to regularly review their finances, cautioned Moore Blatch solicitors. The firm said that a significant number of landlords would become unable to manage some or all of their financial affairs at a point during their retirement due to physical or mental ill health.

Moore Blatch said that approximately 1m LPAs have been taken out in England and Wales since 2012, which it said was a ‘tiny’ number considering that there were around 1.5m people aged over 85 and around 5m aged over 75.

The public’s reluctance to use LPAs stems from a lack of awareness of the protection available, a failure to accept an LPA might be needed and the perceived and actual complexity of putting one in place, said the firm.

Fiona Heald, head of the Court of Protection team at Moore Blatch, said: “While we would argue that most people should have the security of a Lasting Power of Attorney in place, we would expect virtually everyone who has chosen to manage their retirement finances personally to have one. Without an LPA a third party would not legally be allowed to instruct an adviser on any changes to a property portfolio no matter how closely related.”

Heald said LPAs should be drafted by a solicitor as there can be very serious consequences should an LPA be completed in error. “..the forms can appear to be deceptively simple,” she added. “In most cases errors are not discovered until it is too late”

to letHow landlord tax is changing

When George Osborne announced the change, he implied that the extra tax would hit only higher-earning landlords.

It’s true that every mortgaged landlord who pays 40pc or 45pc tax will indeed pay much more under his proposals.

But some basic-rate taxpayers will also pay more tax – because the change will push them into the higher-rate bracket.

In fact, contrary to Mr Osborne’s suggestion, the only buy-to-let investors who will not be hit are the very wealthy who buy property in cash and who don’t need a mortgage.

At the heart of the change is landlords’ future inability to deduct the cost of their mortgage interest from their rental income.

In other words, tax will be applied to the rent received – rather than what is left of the rent after the mortgage interest has been paid.

Here is a worked example assuming you, the landlord, pay 40pc tax.

NOW

Your buy-to-let earns £20,000 a year and the interest-only mortgage costs £13,000 a year. Tax is due on the difference or profit. So you pay tax on £7,000, meaning £2,800 for HMRC and £4,200 for you.

2020

Tax is now due on your full rental income of £20,000, less a tax credit equivalent to basic-rate tax on the interest. So you pay 40pc tax on £20,000 (ie £8,000), less the 20pc credit (20pc of £13,000 = £2,600), meaning £5,400 for HMRC and £1,600 for you. Your tax bill has therefore gone up by 93pc.

Now, say Bank Rate – and in turn your mortgage rate – rises by a small fraction, lifting your mortgage cost to £15,000, while your rent remains at £20,000.

You will have to pay £5,000 tax in this scenario, so you make no profit at all.

 

smoke alarmSmoke alarms and carbon monoxide alarms to become the law

Landlords will be required by law to install working smoke and carbon monoxide alarms in their properties, under new measures announced by housing minister Brandon Lewis.

The government says the move will help prevent up to 36 deaths and 1,375 injuries a year.

This measure is expected to take effect from October 2015, and comes with strong support after a consultation on property condition in the private rented sector.

England’s 46 fire and rescue authorities are expected to support private landlords in their own areas to meet their new responsibilities with the provision of free smoke alarms, with grant funding from government.

Lewis said: “In 1988 just 8% of homes had a smoke alarms installed – now it’s over 90%.

“The vast majority of landlords offer a good service and have installed smoke alarms in their homes, but I’m changing the law to ensure every tenant can be given this important protection.

“But with working smoke alarms providing the vital seconds needed to escape a fire, I urge all tenants to make sure they regularly test their alarms to ensure they work when it counts. Testing regularly remains the tenant’s responsibility.”

The proposed changes to the law would require landlords to install smoke alarms on every floor of their property, and test them at the start of every tenancy.

Landlords would also need to install carbon monoxide alarms in high risk rooms such as those where a solid fuel heating system is installed.

Those who fail to install smoke and carbon monoxide alarms would face sanctions and could face up to a £5,000 civil penalty.

Alan Ward, chairman of the Residential Landlords Association said: “This is a policy that we campaigned hard for, and was a key part of the RLA’s manifesto for the private rented sector.

“Proposals for funding to provide free smoke alarms to landlords are particularly welcome and I look forward to seeing the details of this.”

HMRCHMRC targets landlords over unpaid tax

HM Revenue and Customs is giving landlords who have not declared all of their rental income to the taxman a chance to come forward and ‘put their tax affairs in order’.

 

HMRC has estimated that up to 1.5 million residential property landlords may be underpaying up to £500m in UK tax every year.

Under HMRC’s new Let Property Campaign, landlords who may owe tax – whether through misunderstanding the rules or deliberate evasion – can come forward and tell HMRC about any unpaid tax on rents, and pay what they owe, including any penalties and interest due.

The campaign is open to all residential property landlords – from those that have multiple properties, to single rentals, and from specialist landlords such as student or workforce rentals, to holiday lettings.

Marian Wilson, head of HMRC Campaigns, said: “All rent from letting out a residential property or holiday home has to be declared for income tax purposes. Telling us is simple and straightforward.

“We appreciate some people will have made honest mistakes, and some may not be fully aware that the rent from a property is taxable, and that is why it always makes sense to talk to us so we can help. It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling.

“Telling HMRC about your tax liabilities is simple and straightforward, and help, advice and support are available. The message for all landlords owing tax is simple – it is better to come to us before we come to you.”

HMRC will use information it holds about property rental in the UK and abroad, along with information already held on HMRC‘s digital intelligence system Connect, to identify people who have not paid what they owe. For those that fail to come forward, higher penalties – or even criminal prosecution – could follow.

HMRC also said it will be working with a variety of bodies over the next few months to develop tools and guidance to support landlords of all types and help them get their affairs up to date.

For more details, visit HMRC’s website.

More help is available for landlords by calling HMRC’s Let Property Campaign Hotline on 03000 514 479, between 9am and 5pm, Monday to Friday