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Em Morley

Landlord Tax Restructuring – the Three most Popular Strategies

Published On: April 19, 2017 at 9:44 am

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Landlord Tax Restructuring – the Three most Popular Strategies

Landlord Tax Restructuring – the Three most Popular Strategies

Landlord News has obtained insightful information via The Landlords Union about the three most popular methods to avoid the consequences of restrictions on finance cost relief, which came into force in April 2017.

Over the next four years, legislation will increasingly prevent individual landlords treating their finance costs as expenses. Instead, a tax credit will be applied at a flat rate of 20% of finance costs. This will push several landlords into higher rate tax bands and result in loss of other benefits. In some cases, personal allowances will be lost completely and result in as much as 40% tax on finance costs!

The three most popular restructuring strategies are:

For married couples, the first level of tax planning is a restructure of your income to optimise all available basic rate tax allowances between husband and wife (currently £43,000 each). The tax changes to only landlords whose total taxable income (including mortgage interest) exceeds £43,000 a year. The Chancellor of the Exchequer has confirmed this figure will increase to £50,000 by the year 2020. Restructuring income between spouses is achieved by changing the percentage of beneficial ownership and does not necessitate refinancing.

A  partnership enables landlords to allocate profits disproportionately to ownership and to allocate drawings disproportionately to profits. For example, if the landlord’s adult children or parents help in the running of a business, they could be made partners. This can result in significantly lower tax bills as well as being a useful IHT (Inheritance Tax) planning tool. Furthermore, it’s a step towards incorporation.

Incorporation can wash out all capital gains to date. Also, companies are not affected by restrictions on finance cost relief. However, beware CGT (Capital Gains Tax), Stamp Duty (LBTT in Scotland) and refinancing costs when considering the transfer of your properties to a company. Under the right circumstances, however, all of these are avoidable

The Landlords Union has released a suite of tax tutorials, which are free to download in PDF format.

For further details, please see: https://www.property118.com/Tax118

Government Confirms that EPCs will still be in Operation Post-Brexit

Published On: April 19, 2017 at 9:14 am

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Government Confirms that EPCs will still be in Operation Post-Brexit

Government Confirms that EPCs will still be in Operation Post-Brexit

The Government has confirmed that Energy Performance Certificates (EPCs) and EU energy efficiency laws will still be in operation following Brexit.

Elmhurst Energy, the leading energy performance measurement specialist, has welcomed positive statements in the Department for Exiting the European Union’s white paper document and the Great Repeal Bill.

This publication provides the most significant statement from the Government to date on whether EPCs and other EU energy efficiency laws will still be in place post-Brexit.

The bill will repeal the 1972 European Communities Act and allow all the legislation that currently refers to it to be transferred to UK law, with the minimum gaps and disconnects that would otherwise be created when the UK leaves the EU in March 2019.

Elmhurst has long been confident that EPCs will remain following the UK’s departure from the EU.

The Managing Director of the firm, Martyn Reed, says: “The good news for everyone concerned with climate change and energy efficiency is the paragraph that appeared in the Department for Exiting the European Union’s publication, Legislation for the United Kingdom’s Withdrawal from the European Union, which commits the Government to ensuring that we become the first generation to leave the environment in a better state than we found it.

“The publication says that the UK’s current legislative framework at national, EU and international level has delivered tangible environmental benefits and the Great Repeal Bill will ensure that the whole body of existing EU environmental law continues to have effect in UK law.”

Elmhurst is delighted to hear: “The whole body of existing EU environmental law continues to have effect in UK law.”

Landlords are reminded that EPCs are required for all properties that are built, sold and let. Your responsibilities and how to comply with them can be found here: https://www.justlandlords.co.uk/news/landlords-guide-energy-performance-certificates/

As the law surrounding EPCs is here to stay, it’s vital that you stick to your obligations.

Theresa May Announces Snap General Election for 8th June

Published On: April 19, 2017 at 8:14 am

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Theresa May announced yesterday morning that she plans to hold a snap general election on Thursday 8th June, despite repeatedly claiming that she was against the idea of an early vote.

The next standard general election is scheduled for Thursday 7th May 2020.

In a surprise statement outside Downing Street yesterday morning, the Prime Minister claimed that opposition parties were jeopardising her Government’s preparations for Brexit.

Theresa May Announces Snap General Election for 8th June

Theresa May Announces Snap General Election for 8th June

“We need a general election and we need one now,” she insisted. “I have only recently and reluctantly come to this conclusion, but now I have concluded it is the only way to guarantee certainty for the years ahead.”

May claimed the decision she will put to voters would be about “leadership”.

In her statement, May said her Government is trying to deliver on last year’s EU referendum result by ensuring that Britain regains control and strikes new trade deals.

“After the country voted to leave the EU, Britain needed certainty, stability and strong leadership,” she stated. “Since I became Prime Minister, the Government has delivered precisely that.”

May later repeated her claim that she was taking the decision reluctantly, arguing that she had decided to go for the election last week.

She explained: “Before Easter, I spent a few days walking in Wales with my husband, I thought about this long and hard, and came to the decision that to provide for that stability and certainty, this was the way to do it.”

She added that she was asking the British public to put their trust in her.

Pressed on the notion that the decision was more about personal and party interest than for the sake of the country, May argued: “This is a decision that I’ve taken reluctantly in the national interest.”

She believes that a decisive election victory would strengthen the Government’s hand in Brexit negotiations.

Under the Fixed-term Parliaments Act 2011, May cannot call a general election directly, but she said she would lay down a motion in the House of Commons. This will require two-thirds of MPs to back it.

Commenting on the announcement, the Policy Director of the Residential Landlords Association, David Smith, says: “As the campaign progresses, this election needs to put housing first.

“Over recent years, the private rental market has been hit by tax hikes, benefit cuts and growing regulations, all of which are making it more difficult for tenants to access and afford a place to live. The same changes have made it harder for good landlords to provide the quality accommodation that tenants have a right to expect, and have discouraged further investment in new homes.”

He urges: “We need a housing market that works for all. The majority of landlords provide good quality housing and a good service to their tenants. The political parties need to recognise this, and deliver for tenants and good landlords alike.”

One in four would not tell their landlord about damage!

Published On: April 18, 2017 at 2:06 pm

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A new survey from TheHouseShop.com has revealed that one in four tenants wouldn’t inform their landlord if they made significant damage to their rental property.

Data from the report shows that while 15% of people would hire a professional to repair the damage incurred, over one in ten would attempt to fix issues themselves!

Damages

58% of respondents said that they would report any damages to their landlord, but 27% said that they would not.

Of the 27%:

*11% would attempt to fix damages themselves

* 15% would call on a professional

*Only 1% would hide the problem and hope for the best!

Of those honest 58% of respondents:

*24% would offer to pay the repair bill in full

*7 would contribute to the repair bill

*27 would wait and see if they were required to pay anything

One in four would not tell their landlord about damage!

One in four would not tell their landlord about damage!

Accidents

Nick Marr, Co-founder of property marketplace TheHouseShop.com, noted: ‘While the vast majority of tenants will not actively try to do damage to a property, accidents do happen, and even well-meaning and reliable tenants can end up inflicting significant damage during their tenancy.’[1]

‘The best advice I could give to landlords would be to encourage an open and honest relationship with their tenants, so that tenants don’t feel scared or nervous about reporting any damages as soon as they happen. Having a direct relationship with your tenants, as opposed to using a third party agent or management service, can be a great way to build trust and avoid any nasty surprises further down the line. However, it is important to remember that landlords should always conduct thorough checks and references on any potential tenants before they move into the property. That way you can hopefully avoid the nightmare tenant horror stories that so many landlords can recall in an instant,’ he added.[1]

[1] http://www.propertyreporter.co.uk/landlords/1-in-4-admit-they-wouldnt-own-up-to-landlord-about-damage.html

 

Ltd company landlords now own 20% of UK rental properties

Published On: April 18, 2017 at 10:19 am

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The most recent report from Countrywide has revealed that the number of properties being let by company landlords saw the largest year-on-year rise during Q1 of 2017.

These landlords are now enjoying a 20% share of the market, which is the highest proportion since records began in 2010.

Rises

Countrywide suggests that alterations to tax relief on rental properties, as announced in the 2015 Spring Budget, could be behind the increases.

Landlords letting properties in the capital are most likely to own their own property through a limited company, with 27% of properties let here being owned through this measure.

In fact, company landlord lets drive both the top and bottom of the rental market, with the most and least expensive properties more likely to be owned by a company landlord. During the last year, one quarter of homes let by a company landlord cost less than £500 pcm.

Ltd company landlords now own 20% of UK rental properties

Ltd company landlords now own 20% of UK rental properties

Rents

Rents slipped in March 2017, with the cost of a new let 0.3% lower than it was in the same month last year. The average rent for a new let in Great Britain is now £928-£3 less than one year ago.

This fall in growth was driven by London, the South West and Wales, where rents fell by 0.4% 0.2% and 6% respectively.

Johnny Morris, Research Director at Countrywide, noted: ‘The number of rented homes owned through a company is on the up. The incoming tapering of mortgage tax relief is likely driving the increase. Companies are generally taxed more favourably, particularly with recent changes by government to tax relief, so in many cases landlords can make cash savings by operating through a company rather than as an individual.’[1]

‘Rents fell again in March, mostly driven by falls in London.  Stock growth continues to outpace demand in the capital, giving tenants more negotiating power, pushing down rents.  In much of the rest of the UK rents continued to grow, although at a slower rate.’[1]

[1] http://www.propertyreporter.co.uk/landlords/company-landlords-now-own-1-in-5-rental-properties.html

 

House Prices are Still Growing, but at a Crawl

Published On: April 18, 2017 at 9:56 am

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House prices are still growing annually, but growth is now three times less than 12 months ago, thanks to last year’s rush to beat Stamp Duty changes.

House Prices are Still Growing, but at a Crawl

House Prices are Still Growing, but at a Crawl

The latest England & Wales House Price Index from Your Move and Reeds Rains estate agents shows that house prices returned to growth in March, rising by 3.3% annually to an average of £301,278. Monthly price growth stood at 0.5%.

In comparison, house price growth in March last year was 9.1%, although this was most likely skewed by the number of second homebuyers and buy-to-let landlords rushing to beat the 3% Stamp Duty surcharge.

The March 2017 index does, however, show that house prices have now returned to growth, after inflation slipped from 5.8% in November to 5.3% in December, before dropping to 4.7% in January and 3.1% in February.

Meanwhile, house prices in Birmingham recorded the greatest gains of all UK regions in March for the first time in 21 years.

Property prices in the West Midlands grew by 4.8% in March, to reach an average of £212,706, compared with growth of 1.3% in London and 3.5% in the South East.

The Managing Director of Your Move and Reeds Rains, Oliver Blake, comments: “There is little in the short to medium-term that will disrupt the market greatly, with interest rate increases seemingly on hold, mortgage supply and pricing remaining favourable, and consumer confidence strong. In addition, first time buyer numbers are up, not least as a consequence of Government schemes and the bank of mum and dad.

“However, with supply still tight, rising house prices remain a problem. We therefore cannot afford to overlook the ongoing housing shortage in the UK, which continues to dampen the hopes of many would-be homeowners.”

He continues: “The RICS [Royal Institution of Chartered Surveyors] indicated in its February UK Residential Market Survey that ‘tight supply conditions’ across most regions, along with flat sales in that month, resulted in ‘a further erosion of available stock for sale, with the average stock per surveyor just shy of a record low’. Our data shows that March has seen a pick-up on this.”