Tenant Fees Act, Landlords take note

Landlords note the ban on tenant fees – effective from 1 June 2019 (Source: www.gov.uk – applicable in England)

The Private Rented Sector grew from just 2.8m households in 2007, to 4.5m by 2017. This possibly helped create the climate for the introduction of the tax and regulatory changes. (Source: Paragon, PRS Trends Report, Q1 2019)

The growth to 4.5m was obviously partly fuelled by consumer demand. Both from those who are struggling to raise a deposit to buy their own home and by others for whom it simply meets their current lifestyle choices.

However, recent developments have impacted on the type of Landlord that wishes to remain in this sector. There’s probably been a reduction in the ‘amateur’ landlords. ‘Professional’ landlords have changed focus as they adapt to the new environment.

One example of this, are the growing numbers that are now placing properties within a Limited Company structure. This means that they shouldn’t be affected by the tax relief changes, and lenders may apply a less stringent rental calculation as a result.

This route won’t be right for everyone, particularly those with just one or two properties. Also, interest rates may be higher, and there might be implications for both capital gains tax and stamp duty. This is why it’s vital that you obtain tax advice from your accountant.

Current outlook

Nine out of ten landlords say that tenant demand is either stable, growing or booming. However, the current climate has meant that, conversely, only 7% feel optimistic about their property portfolio. A reflection of this is that almost a quarter of landlords are looking to sell off part of their portfolio.

The tax and regulatory changes will no doubt mean that landlords continue to reassess their investment strategy. They will identify where they would generate the best return, by area, by property type, and by type of tenant. On the upside, plenty are still renting. In fact, one-fifth of all households are in the private rented sector. On average they tend to remain in the property for around 4-5 years. (Source: Office for National Statistics, UK private rented sector, Jan 2019 release)

Where we can assist you

Another positive is that lenders are keen to lend to this market, with some decent rates on offer. So let’s have a chat if you’d like to discuss the current deals, or seek advice on a way forward through the plethora of red tape that now exists, particularly for those who are ‘portfolio landlords’.

Key issues for Landlords

– Stamp duty surcharge of 3% on the purchase of second homes.

– Stepped reduction in mortgage interest tax relief.

– Stricter regulatory rules requiring lenders to stress-test likely future interest rates over a five-year period (unless the loan rate is fixed or capped for five years or more).

– Special underwriting rules for ‘portfolio’ landlords that have four, or more, mortgaged properties.

– Recent changes to rules for HMO (House in Multiple Occupation) landlords.

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Note

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that the rental income will be sufficient to meet the costs of the mortgage.

The value of your Buy-to-Let property and income from it can go down as well as up. You may also require advice on the legal and tax issues.

The Financial Conduct Authority does not regulate legal and taxation advice, and most Buy-to-Let mortgages.

HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Your property may be repossessed if you do not keep up repayments on your mortgage.

Lenders still want to lend to this market