Posts with tag: mortgage interest tax relief

Introduce a Flat Rate of CGT to Create Movement in Property Market, Says Accountant

Published On: September 7, 2016 at 9:23 am

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Introduce a Flat Rate of CGT to Create Movement in Property Market, Says Accountant

Introduce a Flat Rate of CGT to Create Movement in Property Market, Says Accountant

The Government should introduce a flat rate of Capital Gains Tax (CGT) and remove the exclusion for residential property, to create more movement in the property market, insists London chartered accountant Blick Rothenberg LLP.

In recent months, Conservative MP Kevin Hollinrake proposed a reduction in the rate of CGT paid by landlords when they sell their properties to sitting tenants.

Earlier in the year, the former chancellor, George Osborne, cut the main rate of CGT from 28% to 20% in the last Budget. However, the rate reduction specifically excluded any capital gains from residential property.

A partner at Blick Rothenberg, Nimesh Shah, says: “Hollinrake’s proposal theoretically makes sense, as it encourages landlords to sell their property to the tenant, in return for a tax rate reduction. However, this would add yet another unnecessary provision to the current CGT and residential property tax regime, which has seen a raft of changes over the last five years.

“It is not clear how this provision would work in practice, but it will more than likely involve specific anti-avoidance provisions so that the relief is not abused. For example, by selling the property to a family member who is a tenant of the property.”

Shah suggests: “A better proposal would be to simply have a flat rate of CGT and remove the exclusion for gains on residential property. With the forthcoming changes to mortgage interest relief restriction for buy-to-let landlords (taking effect from 6th April 2017), individual owners of residential property are looking at ways to exit their investments, but many are being put off by the higher rate of CGT.

“The Government has said on numerous recent occasions that it wants to create more movement in the UK’s housing market, and aligning the CGT rate would serve to do just that, as well as simplifying the CGT rules in an already complicated tax system.”

Landlords, do you believe that a flat rate of CGT would create more movement in the property market?

Campaigners against tax changes to have case heard next month

Published On: August 19, 2016 at 10:25 am

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A legal campaign to overturn the UK Government’s decision to alter mortgage interest tax relief that residential landlords can claim will be heard next month.

At the end of September, there will be a hearing to determine whether of not there will be a judicial review of the move to reduce tax relief from 2017to 2020.

Challenge

Both landlords and organisations have warned that the move could put off existing buy-to-let landlords coming into the sector. In addition, it could hit existing landlords, who could be left with little choice but to pass on this additional costs to their tenants, in the shape of higher rents.

Campaigners Steve Bolton and Chris Cooper said that they will meet with new housing minister Gavin Barwell on the 9th September, when the issue will be discussed further.

In a statement, the two campaigners said, ‘we will obviously be raising our serious concerns about the impact, making him aware of our legal challenge and doing the best job we can to help him become a supporter of our cause within Government.’[1]

Costly

The Scottish Association of Landlords and the Residential Landlords Association have both warned that these tax changes will make it easier for rogue landlords to provide sub-standard houses to tenants, due to increased costs.

Recently, a recent YouGov survey for the Council of Mortgage lenders suggested that 34% of landlords plan to reduce their investment in the sector as a direct result of the changes.

John Blackwood, of the Scottish Association of Landlords, said, ‘we know from our regular branch meetings around Scotland that landlords are already seeing increased costs as a result of tax changes. As well as impacting on individual landlords, we are concerned this could make it harder to tackle the current housing crisis by making it more difficult to attract much needed investment.’[1]

‘With the uncertain investment environment that has been created by the Brexit vote, at least in the short term, the last thing anyone in the housing sector needs is tax rises which will only make things worse,’ he continued.[1]

‘Furthermore, we are concerned that if costs increase, this could open the door for rogue landlords who don’t follow the rules on either tax or safety and quality standards at a time when real progress is being made at driving these unscrupulous players out of the market.’[1]

Campaigners against tax changes to have case heard next month

Campaigners against tax changes to have case heard next month

Restrictions

Lettings group Belvoir also said that the changes are likely to deter landlords from making further investment, which in turn will restrict the supply of available properties.

Managing director of Belvoir, Dorian Gonsalves, said, ‘Gavin Barwell, the new Housing Minister, takes swift action to unpick the disastrous tax policies that were introduced by the previous Chancellor George Osborne. We believe that the government should be taking steps to incentivise private landlords to invest in Buy to Let properties, as this is what will bring rents down.’[1]

‘If the government wants to make housing more affordable the only way to do this is to increase the supply of properties on the market. It is completely counter intuitive to restrict supply with tax changes and then not expect rents to rise. Gavin Barwell has an opportunity reverse the situation and create an environment where there is an oversupply of rental properties. This can only be achieved by incentivising landlords and making the rental market more affordable for tenants,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-tax-2016081912280.html

Landlords Most Discouraged from Investing by Mortgage Interest Tax Relief Changes

Published On: August 12, 2016 at 10:25 am

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Private landlords are most discouraged from investing further in the buy-to-let sector by forthcoming mortgage interest tax relief changes, according to a survey for SellingUp.com.

With a host of new and proposed laws and tax changes hitting landlords recently, many groups have spoken out against the Government, claiming that it is trying to discourage landlords from investing in property in order to raise revenue and stimulate first time buyers.

SellingUp.com identified the major policies involved in the Government’s clampdown on landlords and asked investors which, if any, were the most likely to put them off buying new properties.

The majority of landlords (65%) said that the forthcoming changes to mortgage interest tax relief will discourage them from investing, with the recent Stamp Duty surcharge coming in second, with 56% of landlords.

Behind is the removal of the 10% Wear and Tear Allowance, at 20%, followed by rent control plans, at 8%, and February’s Right to Rent legislation, at 5%.

However, please note that respondents were able to choose more than one answer.

SellingUp.com also found that the majority of landlords surveyed owned multiple properties, with 60% owning between two and nine properties, while 29% hold more than ten. The remaining 11% own just one property. These figures contrast to recent research, which suggests that most landlords manage their investments part-time and own just one rental property: /majority-landlords-part-timers-just-one-property/

The policies that the landlords were asked about were:

Mortgage interest tax relief

Section 24 of the Finance Act 2015 will phase out the tax relief on mortgage interest for landlords to the basic rate of tax. The law is due to come into force from April 2017. The Government has provided a guide for landlords on how the change will affect them: /government-guide-tax-relief-changes-residential-landlords/

Stamp Duty surcharge

As of 1st April 2016, those buying an additional property, either a buy-to-let investment or second home, are charged an extra 3% in Stamp Duty. We have a guide on how the tax hike is calculated: /landlords-guide-3-stamp-duty-surcharge/

Wear and Tear Allowance 

The automatic 10% Wear and Tear Allowance for landlords was abolished in April 2016. Now, landlords can only claim for actual expenditure.

Right to Rent 

As of February 2016, landlords are legally obliged to conduct immigration status checks on all prospective tenants. If they do not comply with the law, they could face fines of up to £3,000.

Rent controls 

During the London mayoral election race, Sadiq Khan pledged to fight for rent controls in the capital. However, since he has been elected, he seems to have gone quiet on the topic. Recently, the Residential Landlords Association (RLA) claimed that rent caps would spell disaster for tenants: /rent-controls-spell-disaster-tenants/

Landlords, which new/recent policy is likely to discourage you from investing further in the sector?

Mortgage Arrears Drop to Lowest Level on Record

Published On: August 12, 2016 at 8:36 am

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The amount of mortgage arrears has dropped to the lowest level on record, according to the Council of Mortgage Lenders (CML).

Mortgage Arrears Drop to Lowest Level on Record

Mortgage Arrears Drop to Lowest Level on Record

The total number of mortgages in arrears as of June 2016 was 92,600 – down by 13.4% on last year, when it stood at 106,800.

Homeowners with residential mortgages saw arrears of at least 2.5% fall to 87,900 in June, while buy-to-let mortgage arrears dropped to 4,700.

There was also a decline in the number of owner-occupied and buy-to-let property repossessions – from 1,500 to 1,300 for homeowners and from 700 to 500 for landlords.

The CML reports that the number of mortgaged property repossessions is on course to be the lowest since 1982 this year.

The findings arrive as Ministry of Justice data shows that there were 42,729 rental evictions – for both the social and private sectors – in England and Wales in 2015, compared to 5,592 mortgaged property repossessions, despite the fact that rental housing accounts for just one-third of the total housing stock.

The CML believes that lenders try to avoid repossession wherever possible to help owner-occupiers recover from a temporary period of financial difficulty, but landlords may move more quickly to protect their investment properties.

The Director General of the CML, Paul Smee, comments: “Another welcome reduction in arrears and possessions shows that borrowers are continuing to prioritise their mortgage commitments and that lenders remain committed to helping them through a period of temporary difficulty, wherever possible.

“As ever, the key to success in dealing with any payment problems is to address them as soon as possible. Any borrowers anticipating difficulty in paying their mortgage should therefore speak to their lender at the earliest opportunity.”

Buy-to-let landlords must be aware that their finances may be affected by forthcoming changes to mortgage interest tax relief. From April 2017, the amount of tax relief that landlords can claim against mortgage interest will be cut to the basic rate.

Use the Government’s guide to help you prepare for the changes: /government-guide-tax-relief-changes-residential-landlords/

Majority of Landlords are Part-Timers with Just One Property

Published On: August 10, 2016 at 9:59 am

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The majority of private landlords in England only run their lettings businesses part-time and own just one rental property, according to new research.

The survey, by the Council of Mortgage Lenders (CML) along with specialist lender BDRC and the London School of Economics, updates the findings from a similar study in 2010.

Majority of Landlords are Part-Timers with Just One Property

Majority of Landlords are Part-Timers with Just One Property

Six years later, the survey reveals there is almost no change in the number of landlords whose main occupation is not managing their property portfolios.

Back in 2010, 92% of landlords were part-timers, rising to 95% today.

Similarly, the proportion of landlords operating as individuals, rather than limited companies, is virtually unchanged. Six years ago, 89% of landlords managed their portfolio as an individual or couple, dropping slightly to 87% now.

This decrease may be a result of new tax relief changes that are due to be introduced in April 2017. From this date, the amount of tax relief that landlords can offset against mortgage interest payments will be cut to the basic rate.

However, limited companies will be exempt from the changes, which has prompted a move to this type of business structure. Find out more about the mortgage interest tax relief changes here: /mortgage-interest-tax-relief-changes/

Additionally, the survey highlights a move towards larger property portfolios.

Although the majority of landlords still own just one property, the proportion has dropped significantly since 2010, from 78% to 63%.

At the same time, the amount of landlords managing two to four properties has grown from 17% to 30%.

However, most landlords (90%) earn less than half of their income from their rental properties, which is almost unchanged since 2010. Does this suggest that the buy-to-let sector is becoming less lucrative?

With many recent legal changes affecting landlords, such as the new Stamp Duty surcharge, landlords must consider whether investment in the private rental sector is a viable option.

However, the CML does point out that the 2016 survey was only conducted in England, while the 2010 study covered the whole of the UK.

Government Should Scrap Stamp Duty, Insist Conveyancers

Published On: August 8, 2016 at 8:36 am

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The Government should scrap Stamp Duty Land Tax to create a more “buoyant and vibrant” property market, insists the Society of Licensed Conveyancers (SLC).

Government Should Scrap Stamp Duty, Insist Conveyancers

Government Should Scrap Stamp Duty, Insist Conveyancers

Since the 3% Stamp Duty surcharge for buy-to-let properties and second homes was introduced on 1st April, the number of landlords purchasing properties has dropped significantly.

Additionally, with the amount of tax relief that landlords can claim on their mortgage interest payments falling to the basic rate from April 2017, there is widespread concern in the industry that many more landlords will be deterred from investing in the buy-to-let sector, which would reduce the stock of much-needed rental homes.

The SLC believes that scrapping Stamp Duty would not only create a more stable and lively property market, but would also lead to a “marked hike in investment and building of new homes” along with creating a “much more straightforward and quicker home buying and selling process”.

The Chairman of the SLC, Simon Law, says: “Stamp Duty Land Tax is perhaps the most inaccurately named tax in existence. There is no stamp involved, it is not a duty, and it is on assessed property values rather than land. In fact, the only word that is in any way accurate is tax. In reality, SDLT is a direct property transaction tax.

“It is ironic that the Government is engaged in a review to improve the home buying process, when it has introduced legislation that actually makes the process more complicated and tortuous. It is an insult on top of this that HMRC looks to conveyancing lawyers to act as tax collectors.”

Just two weeks ago, the TaxPayers’ Alliance also urged the Government to slash Stamp Duty rates by 50% immediately, with a view to abolishing the charge altogether.

The think tank warns that tenants will end up bearing the brunt of the latest tax hikes for landlords, as the additional tax will result in a reduction of homes on the rental market, which will in turn push rents up.

When the reduction in mortgage interest tax relief comes in from next year, many landlords will be left with no alternative but to pass extra costs onto their tenants. The TaxPayers’ Alliance believes that the Government still has a chance to undertake real reform to tackle the housing shortage in the UK and stop rents from soaring, by either revising or abolishing Stamp Duty and tax relief changes.

The full story can be found here: /think-tank-calls-stamp-duty-scrapped/