Posts with tag: tax changes

RLA claims BTL crackdown is based upon false assumptions

Published On: July 6, 2017 at 8:55 am

Tags: Buy-to-Let,landlords,RLA,tax changes

The Residential Landlords Association has released data that suggests that thousands of private landlords could be pushed into a higher tax bracket unfairly, following the introduction of new tax rules.

Branding the Government’s assumptions as ‘clearly false,’ the RLA believe that nearly two-thirds of individual landlords are only liable for the basic rate of income tax. The trade association suggests that this challenges the assumption that landlords have large incomes and can therefore cope with tax hikes.

Figures

Government figures indicate that of the 1.9m landlords that are not incorporated and return a self-assessment tax return, two thirds were in the basic rate bracket. 30% were found to be in the higher rate band, while just 4% paid the additional rate.

These figures come after David Miles, a former member of the Bank of England’s Monetary Policy Committee, warned that tax rises targeting landlords could well lead to tenants being hurt.

In addition, separate research conducted by the NLA shows that the proportion of landlords with a solitary property who believe that they will be moved into a higher tax bracket has nearly doubled since the end of 2016.

16% of landlords with a single property now feel that this is the case, and increase of 7% from the final quarter of 2016.

RLA claims BTL crackdown is based upon false assumptions

False Assumptions

Chairman of the RLA, Alan Ward, noted: ‘The previous chancellor increased taxes on the private rented sector based on what are now clearly false assumptions. It is especially worrying that Ministers cannot tell how many properties, and therefore tenants, could potentially be adversely affected by their policies.’[1]

‘We need more homes to rent to meet growing demand. It is time that the tax system encourages rather than stopped housing growth cold dead,’ he added.[2]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/7/buy-to-let-tax-crackdown-based-on-false-assumptions

Landlords Still have Appetite for Future Property Investments, Claims Study

Published On: June 7, 2017 at 9:25 am

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let landlords,landlord taxes,mortgage interest tax relief,property investors,tax changes

Although most have been affected by recent and ongoing restrictions to tax relief on finance costs, landlords still have an appetite for future property investments, found a recent study by Mortgages for Business.

Landlords Still have Appetite for Future Property Investments, Claims Study

Results from the latest Property Investor Survey show that the proportion of landlords seeking to expand their portfolios has grown to 48%, up from 45% in November last year and 41% a year ago, shortly after the 3% Stamp Duty surcharge on additional properties was introduced.

The survey was conducted over a two-week period in May this year, having been sent to Mortgages for Business clients, and advertised on social media and landlord forums. A total of 186 property investors completed the study, answering questions on their portfolios and how they are financed.

At the same time, landlords have been increasingly opting for five-year fixed rate mortgages, rather than three-year fixes. In May 2016, three and five-year fixed rate deals were each preferred by roughly one in five landlords (18% and 21% respectively).

In the time since, however, there has been a huge shift in investor preferences. Five-year fixed rate mortgages are now the preferred option for 42% of landlords, up from 33% in November last year and twice that of May 2016.

Three-year fixed rate deals, meanwhile, are now less popular than even ten-year fixes, being chosen by just 5% of respondents – less than a third of the proportion last year.

The COO of Mortgages for Business, Steve Olejnik, comments on the study: “Although we expect buy-to-let lending to reduce somewhat this year, these results demonstrate that landlords are a resilient bunch, capable of adapting their investment strategies to successfully accommodate the new fiscal and regulatory landscape. Incorporation is becoming a standard practice and the move towards five-year fixed rates allows landlords to maximise their borrowing options.”

When asked how investors were adjusting to the changing economic environment, 62% claimed to have consulted a professional tax adviser.

Of these, the majority (34%) had sought advice specifically because of the changes to tax relief on finance costs, while 28% said that they already had an existing relationship with a tax adviser.

Although it is positive to see many landlords seeking professional advice, Mortgages for Business urges the remaining 38% of investors to ensure that they understand how their tax liabilities may be changing.

BTL deals for LTD companies doubles in last year

Published On: May 23, 2017 at 9:48 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,buy-to-let landlords,limited companies,tax,tax changes

It is certainly a challenging period for buy-to-let landlords, with a host of recent Government-implemented changes threatening to cause long-lasting harm to the sector.

The phasing out of mortgage interest tax relief, the introduction of the 3% Stamp Duty surcharge on buy-to-let and second homes and the Right to Rent scheme, amongst others, have led a number of landlords to leave the market.

Those that remain will be left with increased tax bills moving forwards, with many left with little alternative but to increase rents. Many will also be thinking how best to conduct their commercial and business duties.

Limited Companies

To avoid being badly hit by the changes to mortgage interest tax relief, a number of investors are looking to set up company structures in order to manage their rental assets.

This has been highlighted by the substantial rise in mortgage lending to buy-to-let landlords via limited companies. Now, this number looks set to increase further, thanks to a rise in the number of mortgage products being aimed at limited companies.

The most recent research from Moneyfacts indicates that the proportion of buy-to-let deals available to limited companies has doubled during the last year.

BTL deals for LTD companies doubles in last year

Shift in Focus

Charlotte Nelson, finance expert at Moneyfacts.co.uk, noted: ‘It feels like the BTL market has been hit from all angles recently, and this has left landlords feeling vulnerable and wondering whether it is still worth continuing in the BTL sector. This has resulted in a shift in focus to limited companies, away from individual ownership, which is influencing not just landlords but also providers offering BTL mortgages.’[1]

‘As the reality of April’s tax changes starts to bite, the proportion of deals available to limited companies has grown dramatically, having increased by 7% in just six months. With the extra pressure in the BTL market and the added interest in limited companies, it is no surprise that lenders have leapt into action and started offering more deals to limited companies,’ she continued.[1]

Concluding, Nelson observed: ‘Despite the boost in product numbers, borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the BTL market. For example, the average two-year fixed rate BTL mortgage for those applying as a limited company stands at 4.22% today, whereas the average two-year fixed rate for the rest of the market is significantly less at 2.97%. With all the extra legwork a limited company option entails, any borrowers considering it should consult a financial adviser to ensure it is the right route for them.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/5/btl-deals-available-to-limited-companies-double-in-a-year

Tenants Securing Lower Rents Ahead of Lettings Fee Ban

Published On: April 26, 2017 at 9:22 am

Author: Em Morley

Categories: Landlord News

Tags: landlord taxes,letting agent fee ban,rent prices,tax changes,tenants

Tenants are getting savvier, by securing lower rents ahead of the lettings fee ban, according to a study of letting agents by ARLA Propertymark.

In the March Private Rented Sector report from the organisation, 3.6% of letting agents had seen rents drop, compared with 2.2% in February. There were still increases, however, with 25% of agents reporting that landlords had put their rents up, down from 32% last year.

Tenants Securing Lower Rents Ahead of Lettings Fee Ban

Worryingly, however, letting agents also reported an increasing number of landlords selling their rental properties during March. An average of four landlords per letting agent branch had announced plans to sell up last month.

No reason was given for the decision, but it does coincide with the reduction in mortgage interest tax relief and forthcoming letting agent fee ban.

The last time the number of landlords selling their properties rose above three per branch was in November last year, when the fee ban was announced.

David Cox, the Chief Executive of ARLA Propertymark, believes that this shows that tenants are already being affected by the Government’s buy-to-let tax changes.

It is believed that rent prices will go up following the lettings fee ban, as landlords will instead be forced to foot the charges.

Meanwhile, the supply of rental stock remained flat, at an average of 183, but was 8% higher than March 2016.

Letting agents also had a higher number of tenants registered, at 36 per branch, up from 34 in February.

Cox comments on the report: “It’s concerning that, despite supply increasing over last year, stock failed to return to the market after dipping in February.

“When we also consider that this is coupled with a rise in the number of landlords selling their properties, this is bad news for those searching for a rental property.

“The introduction of mortgage interest relief means the market is becoming less and less attractive to investors, and it appears some landlords are, as we predicted, choosing to exit the market rather than pay the higher taxes.”

He continues: “What’s more, two thirds of our members are concerned the Government will introduce even more landlord taxes in 2017, which will only further dampen supply.

“Following the announcement of the ban on letting agent fees, we expect the situation to only get worse for tenants when, inevitably, the costs are passed on to tenants through higher rents.

“However, it’s positive that more tenants are taking action and negotiating rent reductions before the consultation ends and they see their rents increase.”

Have your tenants been requesting lower rents recently?

Lettings Market Shows Momentum in March, Finds Agency Express

Published On: April 20, 2017 at 8:49 am

Author: Em Morley

Categories: Property News

Tags: lettings market,property listings,rental properties,tax changes

Following a slowdown in the UK lettings market throughout February, the latest data from Agency Express’ Property Activity Index shows that the sector showed momentum in March.

Lettings Market Shows Momentum in March, Finds Agency Express

Across the country, new listings to let rose by 12.2% last month, while the number of properties let was up by an average of 16.4%.

Looking at activity across the lettings market in the UK, all 12 regions included in the Property Activity Index recorded growth in both new listings and properties let.

Top performers in the lettings market last month include:

Properties to let

Central England: +28.40%
London: +28.20%
South East: +22.90%
Yorkshire and the Humber: +19.50%
South West: +17.00%
Wales: +17.00%

Properties let

East Midlands: +32.20%
East Anglia: +31.10%
Central England: +19.80%
London: +19.60%
North East: +18.60%
West Midlands: +18.30%

March’s top performing region was Central England, with growth in new listings of 28.40% – the region’s largest increase for March since 2014.

London followed suit, with a 28.2% rise in new listings, marking the capital’s largest monthly increase for March since the records began in 2012.

The month-on-month data also highlighted a strong lettings market in the West Midlands. As the only region to record consistent growth since the beginning of the year, figures rose again for a third consecutive month. The number of properties let increased by 18.3%, while new listings were up by 8%.

Sales in the region also flourished last month, according to the latest sales index from Agency Express.

Stephen Watson, the Managing Director of Agency Express, comments on the latest lettings market data: “Throughout March, we typically see an increase in activity across the UK lettings market and, this month, figures did surpass those recorded in 2016. However, between the demand for buy-to-let loans seemingly decreasing since the Stamp Duty hike and the recent tax relief changes, it is difficult to say what the forthcoming months may hold. We may see some landlords selling off their properties as a result of the changes.”

Landlord Tax Restructuring – the Three most Popular Strategies

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

Author: Em Morley

Categories: Finance News

Tags: finance,landlord taxes,mortgage interest tax relief,tax changes

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