Posts with tag: landlord taxes

Another Mortgage Lender Tightens its Criteria for Landlords

Published On: May 20, 2016 at 9:37 am

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Yet another mortgage lender has tightened its criteria for buy-to-let landlords, ahead of changes to their finances.

Barclays has now imposed more stringent checks on landlords looking for buy-to-let mortgages.

Another Mortgage Lender Tightens its Criteria for Landlords

Another Mortgage Lender Tightens its Criteria for Landlords

From 26th May, the bank will increase its rental cover requirements, meaning that landlords must receive more rental income relative to their mortgage payments.

However, the lender will continue to conduct an income and expenditure assessment to measure whether borrowers can use their earnings to cover any shortfall in rental cover.

Additionally, Barclays will reduce its stress rate from 5.79% to 5.5%.

This announcement follows last month’s decision by Nationwide to tighten its lending criteria for buy-to-let landlords.

The building society’s buy-to-let arm, The Mortgage Works, revealed that it would require landlords to be able to cover 145% of their mortgage costs in rental payments, up from 125%.

In a statement to mortgage brokers, Barclays claims that the new changes are being introduced to account for the reduction in mortgage interest tax relief for landlords from April 2017.

A spokesperson for Barclays says: “As a responsible lender, Barclays Mortgages wants to ensure that aspiring landlords can continue to meet all their financial commitments and are protected as they look to invest in buy-to-let over the long term.

“Customers will continue to complete a full income and expenditure assessment, and we will continue to allow personal disposable income to make up any shortfall in the rental cover calculation.”

As of April next year, the amount of mortgage interest that landlords can offset against tax will be cut to the basic rate.

The Managing Director of Nova Financial, Paul Mahoney, insists that buy-to-let “is not dead”, and has advice for landlords ahead of the tax change: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

We will continue to provide you with updates of any changes to landlord finance and taxes.

Landlords Consider Buying Overseas Property to Avoid Tax Changes

Published On: May 20, 2016 at 8:59 am

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Around a quarter of landlords (23%) are considering buying an overseas property to avoid tax changes introduced by Chancellor George Osborne.

The research, conducted by PropertyLetByUs.com, found that the Government’s new tax measures might push some landlords out of the UK into foreign markets, in an attempt to secure better returns on their investments.

A separate report also claims that the tax changes will drive much-needed landlords out of the private rental sector.

On 1st April, a higher rate of Stamp Duty was introduced for buy-to-let landlords and second homebuyers. Additionally, from April 2017, the amount of tax relief that landlords can claim on their mortgage interest payments will be cut to the basic rate.

The PropertyLetByUs.com survey asked landlords to name their top overseas property locations. Unsurprisingly, France took the top spot for one in five investors (23%). Spain came a close second (18%), followed by Italy (11%), Bulgaria (3%) and Germany (1%).

It is estimated that a quarter of overseas buyers that own second homes in France are British, making them the largest group of international owners.

Landlords Consider Buying Overseas Property to Avoid Tax Changes

Landlords Consider Buying Overseas Property to Avoid Tax Changes

The firm states that if landlords are considering buying an overseas property, it is vital that they educate themselves about the different laws and taxes they will face in their chosen country. Holiday home insurance firm Insure My Villa has lots of helpful tips and advice on being an overseas property owner.

The Managing Director of PropertyLetByUs.com, Jane Morris, explains: “Each country has different tax laws relating to property and they can change quickly, with little warning. For example, in 2012, the French government imposed a 15.5% social charge on capital gains from the sale of second homes or rental income – a measure which was estimated to bring in €250m a year. Tax on rental income rose overnight, from 20% to 35.5%, while capital gains tax on property sales rose from 19% to 34.5%.

“These new tax measures hit overseas investors hard and meant that for example, a British couple who bought a French property for €200,000 20 years ago and were selling it for €750,000 would have to pay almost €60,000 in social charges, on top of the existing capital gains tax. They received no credit against their UK tax bill for this amount.”

She continues: “This onerous tax measure was overturned in 2015 by the European Union’s top court, who deemed it illegal and ordered the French government to reimburse tens of millions of euros to British and other EU non-resident owners who rented or sold their properties in the past two to three years.

“Clearly, overseas property taxation can be more costly than the UK, despite often much lower property prices. It is important that landlords take into account potential tax hikes and don’t get sucked into all the marketing hype that surrounds overseas property investment. Property experts will often highlight new markets they appear to be investment hotspots and you may be able to find bargains in countries where prices have fallen dramatically, but it’s often wiser to buy in more established markets.”

The firm has put together some helpful tips on investing in overseas property:

  • Make sure your property is easily accessible with good amenities nearby. You should also take into account the holiday season in the area, as many tourist destinations shut down at the end of the season.
  • Do some research on the rent price of similar properties in the area. Even better, if the property you are buying is already being rented out, find out how much the current owner charges and how many weeks per year it is occupied.
  • It can be wise to market your property through a local estate agent, but you must remember to take fees into account. Cheaper marketing options include holiday rental websites and word of mouth through family and friends.
  • You must pay income tax on the rent you receive. However, you can deduct some expenses from your rental income to reduce taxable profits. Here is more information on calculating your taxes correctly: https://www.justlandlords.co.uk/news/government-produces-online-tax-tutorial-landlords/

NLA Chief Executive Accuses Chancellor of Insulting Landlords

Published On: May 18, 2016 at 11:39 am

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The Chief Executive of the National Landlords Association (NLA), Richard Lambert, has accused Chancellor George Osborne of insulting private landlords.

NLA Chief Executive Accuses Chancellor of Insulting Landlords

NLA Chief Executive Accuses Chancellor of Insulting Landlords

Speaking at the Instinctif Partners Great Housing Market Debate, Lambert addressed the Chancellor’s crackdown on the buy-to-let sector.

He claims that Osborne made a mistake by introducing a 3% Stamp Duty surcharge on buy-to-let properties and by reducing the amount of tax relied that landlords can claim on mortgage interest payments.

As of 1st April, landlords are now charged an extra 3% in Stamp Duty on the purchase of rental properties. This guide will help you understand the tax change: https://www.justlandlords.co.uk/news/landlords-guide-stamp-duty-surcharge/

From April next year, landlords will be hit by the reduction in mortgage interest tax relief. Finance expert Paul Mahoney, of Nova Financial, has explained how this will affect your lettings business: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Lambert said: “[The Government] is now talking of discouraging amateur landlords in favour of institutions, in effect directly insulting my members.”

Lambert warns that many landlords will be unaware of the future changes to mortgage interest tax relief and will be shocked when they start receiving bills from the taxman in the near future.

Nigel Terrington, the Chief Executive of the Paragon Group, insists that the changes do not create a level playing field between landlords and homebuyers – as intended by the Government – as landlords don’t benefit from schemes such as Help to Buy and are charged Capital Gains Tax on accumulated housing wealth, unlike homeowners.

Nick Leeming, the Chairman of estate agent Jackson-Stops & Staff, believes there should be a free market for owners and tenants.

Issues such as the forthcoming EU referendum and changes to the law on gazumping were also discussed at the event.

Tax Changes will Drive Much-Needed Landlords from the Sector, Says Report

Published On: May 18, 2016 at 8:41 am

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Recent buy-to-let tax changes will drive the country’s much-needed private landlords from the private rental sector, according to a new report from the London School of Economics (LSE).

The Taking Stock document also claims that some landlords will pass their increased costs onto tenants, which will stretch household budgets and push homeownership further out of reach.

The report analyses the private rental sector and its importance to the UK housing market.

Although the Government has focused on improving the institutional build-to-rent sector, the report insists that small private landlords will continue to be the backbone of the private rental sector.

The LSE believes that demand for private rental housing will continue to grow, and to meet this, there must be investment in the sector.

Tax Changes will Drive Much-Needed Landlords from the Sector, Says Report

Tax Changes will Drive Much-Needed Landlords from the Sector, Says Report

However, it notes that landlords in the UK are already treated less favourably for tax purposes than many other countries, ahead of further clampdowns.

These measures include a 3% Stamp Duty surcharge on buy-to-let properties, the removal of the Wear and Tear Allowance, and a reduction in mortgage interest tax relief.

We have expert advice from Nova Financial’s Paul Mahoney on how to factor these changes into your business: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The authors of the Taking Stock report, Kath Scanlon, Christine Whitehead and Peter Williams, reveal that the private rental sector has more than doubled in the last 15 years, now accounting for around one-fifth of all housing.

Despite Government initiatives to encourage institutional investment, the majority of homes are owned by small landlords with just one or two rental properties.

“Even if institutional investors enthusiastically enter the market, individual landlords will remain dominant – as they are across Europe,” says the report. “Shrinking the sector therefore does not seem a sensible way forward, given what we know about unmet demand and need.”

Regardless of buy-to-let tax changes, the authors suggest that demand for private rental housing will continue to grow, with individual landlords remaining the main providers. They raise concerns over whether there will be sufficient landlords to meet continuing growth in tenant demand.

However, the LSE believes that the growth of buy-to-let is in part due to low returns in other asset classes, which is likely to continue. Additionally, it states that high house prices and large deposit requirements make it unlikely that young households will be able to purchase their own homes, which will further increase their reliance on the private rental sector.

Scanlon says: “There have been a number of recent changes in the tax treatment of small landlords, and more generally in the tone of policy discussion about the private rented sector.

“These decisions seem to reflect anecdotal rather than hard evidence, as there is a striking lack of data about landlords and their business models. The current Government favours institutional landlords, but even if that part of the sector were to grow rapidly, small landlords would still be the backbone of the industry.”

She insists: “We need a private rented sector that works for the long term with policies that reflect the housing challenges the UK faces.”

Where to Find the Highest Rental Yields in the UK

Published On: May 10, 2016 at 9:12 am

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With many financial changes affecting the buy-to-let sector, most landlords will be looking to achieve the highest rental yields possible. So where should you invest?

Where to Find the Highest Rental Yields in the UK

Where to Find the Highest Rental Yields in the UK

A buy-to-let investment search portal, Buy2Let, has produced an interactive map based on a selection of data from the Royal Institution of Chartered Surveyors, LSL Property Services, LendInvest, Move With Us, HomeLet and Hamptons International.

The map acts as a guide to which locations in the UK will offer the highest rental yields by 2020.

The figures show gross rental yield and cumulative yield growth between this year and 2020.

Unsurprisingly, Buy2Let believes that yield percentages will be the greatest in the North of England and the Midlands in four years’ time.

For the highest rental yield growth, the firm suggests investing in Liverpool, Manchester, Leeds, York and Birmingham. Alternatively, Sheffield, Nottingham, Leicester, Coventry and Carlisle are set to perform well.

If you are thinking of investing in the south, Buy2Let highlights Reading as a hotspot for rental yields, alongside Cardiff and the surrounding areas.

In London, the greatest rental growth areas are Stratford, Hackney, Whitechapel and Canary Wharf.

At the opposite end of the scale, Plymouth, Great Yarmouth and Bath have some of the lowest average rental yield percentages in England and Wales, despite offering high rental values. If you have rental properties in these areas, it may be worth finding a more lucrative investment further north.

While the figures use a wide range of data to determine the rental yield hotspots, the buy-to-let sector continues to face many changes. Alongside the 3% Stamp Duty surcharge – introduced on 1st April – landlords will face reductions in mortgage interest tax relief from next year.

For details on how these financial changes will affect your business, we have advice from expert Paul Mahoney, of Nova Financial: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

If you are concerned about rental yields on residential property, it may be a good idea to consider commercial units, as many landlords are already doing: /residential-landlords-moving-away-traditional-buy-let/

Rents Rise on New Tenancy Agreements, Reports HomeLet

Published On: May 5, 2016 at 8:29 am

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Rent prices for new tenancy agreements have risen across most parts of the UK in the three months to the end of April, according to the latest HomeLet Rental Index.

Rents Rise on New Tenancy Agreements, Reports HomeLet

Rents Rise on New Tenancy Agreements, Reports HomeLet

Rent price growth in the UK is currently being driven by substantial increases in Scotland and the East Midlands, believes the firm.

The average rent price on a new tenancy agreement in the private rental sector in the UK, excluding Greater London, rose by 5.1% to £764 per month in the three months to April compared with the same period last year.

This rental data, the first to be released since the 3% Stamp Duty surcharge for landlords was brought in on 1st April, shows that rent prices on new tenancies continue to rise at a much faster rate than inflation.

According to the index, rent price growth was led by Scotland, where rents increased by 11.4% annually to £704 per month. The East Midlands followed at 7.9%, taking the average rent to £646.

In London, rents rose by 7.7% to £1,543 a month. However, this rate of growth is considerably lower than the double digit increases recorded in 2015.

Just one region recorded a decrease in rents – prices fell by 1% in the North West.

The Chief Executive of Barbon Insurance Group – HomeLet’s parent company – Martin Totty, comments: “The April HomeLet Rental Index has been much anticipated given the potential impact of the Stamp Duty changes on the private rental market; for now, however, rental price growth in most areas of the country is unchanged from the trends observed over almost three years.

“It may be that over the next several months, the trends observed in the rental market begin to reflect the signs of some slowdown in the rate of house price growth that we are now beginning to see and that will be something to watch closely.”

Recent research from the Residential Landlords Association suggests that the majority of landlords are considering putting their rent prices up to accommodate tax changes.