Tenant Tax: landlords fight back

Landlords are angry at new legislation – the so called Tenant Tax – which threatens to turn the costs involved in owning and running rental properties from a normal business expense into taxable revenue. Steve Bolton, founder and chairman of Platinum Property Partners, and fellow landlord Chris Cooper, have launched a crowd funding appeal to raise enough money to mount a legal challenge in the courts against the government to try and abolish the ‘Tenant Tax’ (section 24 of the Finance (No.2) Act 2015. They call the legislation “ludicrous” as they believe it won’t only result in substantial losses for landlords, it will also result in greater increases in rents for affordable homes, leading to a greater number of people being made homeless.

Their argument is that the new Finance Act overturns the fundamental financial business principle “that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits”.

They’re also angry that the government is putting a lot of the blame for the current housing difficulties on to BTL landlords. As Bolton commented: “No landlord wants a boom and bust housing market. Nor do they want to keep any hard-working person who wants to and can afford to buy their own home from stepping onto the property ladder. However, blaming buy-to-let landlords for these issues is not only a huge distortion of the truth, it conveniently hides the fact that successive governments have failed us on the vital issue of housing. Over one million homes that needed to be built over the last decade (by the Government’s own figures) have not been built.”

As a result, Bolton and Cooper set up CrowdJustice earlier this year to help raise enough financial backing to enable them to challenge the changes to buy-to-let mortgage interest tax relief. They lodged an application for a Judicial Review in February which was made possible because of £50,000 in donations from 737 campaign supporters, and are currently waiting to hear whether or not they have permission to proceed to a full Judicial Review hearing.

Ultimately they believe the legal challenge will cost £250,000, and they could not make it happen without financial help. They have just launched a further fund raising bid to raise another £50,000 for the next stage of the process.

The pair have also organised a Tenant Tax Summit in London on 9th June to give everyone in the private rental sector the chance to take action. They explained that, “Without warning or consultation, we are now witnessing a devastating and relentless shock and awe campaign of betrayal of landlords by Government”.

Click here for more details and to donate to the CrowdJustice Tenant Tax campaign.

Click here for more details of the Tenant Tax Summit, 9 June 2016.
If you are looking for a BTL property in Hertford, Ware or the surrounding areas, get in touch with us for advice about the best kind of properties and locations, to make the most of your investment.

For more information or advice call us on 01992 308181, or email info@knightpm.co.uk.

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How The Mortgage Credit Directive could affect ‘accidental landlords’

New European rules mean some buy-to-let loans will be regulated for the first time. As a result of the Mortgage Credit Directive, from 21 March 2016, anyone taking out a consumer buy-to-let mortgage will have to take out a regulated product.

Under the Directive, the vast majority of buy-to-let lending will be called Business Buy-to-Let (BBTL) and will be non-regulated because landlords are usually seen as business borrowers who require less supervision.

However, some BTL mortgages will be defined as Consumer Buy-to-Let (CBTL), and these types of loans will be regulated, with tougher rules and affordability tests to ensure borrowers can afford a product.

A loan will be classified as CBTL if the borrower or an immediate relative of theirs has ever lived in the property, or intends to live in the property in the future. The Treasury estimates that around 11% of existing buy-to-let mortgages fall into this category.

CBTL borrowers will therefore have to go through a similar application process as those taking out a residential mortgage. Given that CBTL loans are now regulated, brokers who plan on advising landlords about them will need the required permissions from the Financial Conduct Authority.

Does this mean greater regulation will be good news?

Possibly not. Accidental landlords could actually find themselves with fewer mortgage options because of the extra time needed to process applications. Older borrowers may find it harder to get a loan because of the stricter affordability tests.

At the moment, lenders have a right to waive affordability criteria on remortgages where there’s no additional borrowing or where they are the current lender. But there are industry concerns that the MCD won’t allow lenders to waive affordability checks under any circumstances.

Landlord Today magazine fears that the new Directive could prevent CBTL landlords from switching to cheaper mortgage deals. Under the UK Mortgage Market Review (introduced in April 2014), new affordability checks were brought in requiring lenders to calculate whether a borrower could still afford a mortgage if the interest rate increases by 3% and some lenders wanting to remortgage or switch to a better deal were turned down. Apply this to the Directive, and it could lead to the rather ludicrous situation in which “many could be told they cannot afford afford repayments that are actually cheaper than those they are currently making”.

However, while some consumers may not do as well as others under the new Directive, letting out second properties has provided a safe, long-term income for many small investors and will continue to do so for the foreseeable future.

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How will stamp duty increases for second homeowners affect the rental market?

Small landlords investing in buy-to-let property face a huge hike in stamp duty from April 2016. The new, higher stamp duty rates will apply to buy-to-let properties as well as holiday lets. However corporate entities or funds with 15 residential properties or more will be exempt from the higher rates.

Those who buy property after 1st April will have to pay three more percentage points in stamp duty than they do now. So if you buy a house at, say, £300,000, the duty will rise from the current £5,000 to £14,000 – a whopping rise of 180%. The Treasury estimates the move will result in an extra £625m in the next financial year.

This is obviously going to have a negative effect on cash flow for landlords and make buy-to-let less desirable for small investors. It’s also likely to make renting homes less desirable for tenants – the Royal Institution of Chartered Surveyors expects rents across the UK to increase over the next five years as a result.

The impending stamp duty increase has already had a short-term effect on the housing market. The UK’s largest chartered surveyor, e.surv, has reported that growth in buy-to-let mortgage approvals has pushed lending on homes to its highest level in nine years, with average selling prices rising 17%.

The National Landlords Association is also forecasting that half a million buy-to-let flats and houses will be put on the market in the next year as landlords dispose of their properties. The Government’s hopes are that if house prices drop, more young people will be able to get onto the housing market. However, economists at Standard & Poor are warning of a decline in home ownership over the next few years, with people increasingly being forced to rent and therefore unable to save enough to buy their own property.

Existing landlords won’t be affected by the changes unless purchasing additional properties, but if you are thinking of investing in buy-to-let, it’s now more important than ever to do your sums and ensure you’re getting a good return on your investment. If this is something you’d like us to help you with, please feel free to get in touch.

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How can I avoid tenants not turning up for viewings?

Q – When I’m booking viewings to show potential tenants around my rental property, quote often they simply don’t turn up, which wastes a lot of my time. What’s the best way to avoid this?

A –  Around 25% of booked viewings simply don’t happen for one reason or another which,  as you’ve discovered, can be a big waste of time. Here’s what we do to avoid these viewing ‘no-shows’.

Avoid tenants not turning up for viewings and save time.

Avoid tenants not turning up for viewings and save time.

Firstly, immediately after booking the viewing, we confirm by email the full property address, plus the viewing date and time. This means there’s less chance of people going to the wrong property (they’re often viewing several the same day) or getting lost. It also means there’s no room for confusion over exactly when the appointment’s been made for.

Secondly, we include our mobile phone number in the email, with a request for the viewer to call or text us roughly an hour before the viewing. We tell them that if we don’t hear from them, we assume they won’t be coming, so please call to make sure we’re there when they are.

Thirdly, if we haven’t heard anything from the viewer, we’ll call them around half an hour before the allotted time, or at least before driving to the property. Often their phone will go to voicemail, so we’ll leave them a message asking them to call us back if they’re still coming. If we don’t hear anything, then we don’t go – simple.

While it’s not a foolproof system, it does work 95% of the time, which means a lot less time being wasted by prospective tenants who don’t show up for viewings.

For more information call us on 01992 308181 or email us at info@knightpm.co.uk

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Can my landlord refuse to pay back my security deposit?

Q – I am a single mum of two teens and currently having disputes with my landlord about my deposit. After giving advanced notice of my moving out they refused to refund my deposit, insisting that I have broken some clause in the tenancy agreement.  Can my landlord refuse to pay back my security deposit?

Can my landlord refuse to pay back my security deposit?

Can my landlord refuse to pay back my security deposit?

A – Assuming that you’re on an assured shorthold tenancy, your landlord cannot just refuse to repay your deposit. If you are in dispute, then any deposit deductions will be decided by a tenancy deposit scheme adjudicator, and your landlord will need to provide evidence to support his claim. This of course assumes that your landlord has actually protected your deposit in a government approved scheme, as he is required to do by law, and that he has served you with the correct ‘prescribed information’. If he hasn’t done either of these things then you can claim back three times the deposit, plus your original deposit.

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Stamp duty overhaul helps buy-to-let landlords

The new stamp duty land tax (SDLT) regime introduced on 4th December means buy-to-let landlords will receive a welcome cut in stamp duty when buying new properties. According to Chancellor, George Osborne, 98% of purchasers will now pay less tax than under the old scheme.

The stamp duty overhaul means savings for buy-to-let landlords.

The stamp duty overhaul means savings for buy-to-let landlords.

The old SDLT  was almost universally disliked  because of the sudden jumps in the amount of tax payable once a particular threshold was exceeded. This created pricing ‘dead zones’ at amounts just above the old thresholds.

The new scheme works in much the same way as income tax, so higher tax rates are only payable on the amount over the threshold, rather than the whole purchase price, as previously.

Political game-playing aside, it’s a move that was welcomed by most in the property industry. Buy-to-let landlords looking to expand their portfolio will certainly benefit, as will most buyers who aren’t yet at the top of the property ladder – unless they live in London.

The new SDLT rates are:

From £0 to £125,000 – 0%

From £125,001 to £250,000 – 2%

From £250,001 to £925,000 – 5%

From £925,001 to £1.5m – 10%

Above £1.5m – 12%

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Landlords now being forced to work for UK Border Control?

From next year landlords and letting agents in the UK will be helping the government with its immigration policy. They will need to comply with the new Immigration Act 2014, which will require them to check that any prospective tenants have a right to reside in the UK.

Landlords face a fine of up to £3,000 for not checking tenants' IDs.

Landlords face a fine of up to £3,000 for not checking tenants’ IDs.

In addition to carrying out the usual referencing and credit checks, landlords will be required to check prospective tenants’ original ID documentation in their presence, and will need to keep copies of all paperwork.

But the government won’t be paying landlords for carrying out ID checks on its behalf. Instead there’s the threat of a £3,000 fine for failing to comply. This new legislation is tantamount to the government admitting its border controls are ineffective, whilst seeking to pass the responsibility onto the private sector.

These ID checks are something which responsible landlords and letting agents should be doing anyway, but it’s a step too far to fine landlords for not doing them. If they haven’t done them then there’s a fair chance they’re going to be in trouble anyway!

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Do you meet best practice?

As a landlord you must do a number of things to be legal. But there’s a difference between what’s required by law and best practice. A big difference!

That’s why The Royal Institution of Chartered Surveyors (RICS) has written a best practice guide for landlords.

Do you meet minimum standards or best practice?

Do you meet minimum standards or best practice?

Lack of knowledge is not a defence for getting something wrong. So if you are unsure what to do, think about using an agent.

As luck would have it, the guide also gives you some tips on how to find a good one. For instance, you should only use an agent who:

1. is regulated by a professional body, eg RICS or ARLA;
2. belongs to a client money protection scheme; and
3. has professional indemnity insurance.

To find out more about best practice for landlords, download your free copy of the guide here:

Download your free copy of the Private Rented Sector Code of Practice.

If you have any questions, we’re here to help – just call Jan or David on 01992 308181.

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Buying a rental property in Hertford or Ware? – think like a tenant

If you’re thinking of investing in a buy-to-let property in Hertford or Ware, but aren’t too sure which areas or roads are suitable, one tip is to think like a tenant. Where would a tenant look?

rental property in hertford

Think like a tenant when buying a property to rent in Hertford or Ware.

Places within a five minute walk of Hertford North, Hertford East or Ware stations will always be in demand, as will properties close to shops and other transport links, such as Hertford bus station or the A10 junctions.

If you’re looking at properties a little further from the town centre and stations, where tenants are more likely to own one or more cars, then allocated or off-street parking is highly desirable, too.

As always, location is key, so think like a tenant!

For more advice on buying a rental property in Hertford or Ware, call Knight Property Management on 01992 308181 and ask for Jan or David.

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Landlords in HMRC’s sights

Her Majesty’s Revenue and Customs (HMRC) is cracking down on landlords’ undeclared rental income.

Out of the UK’s 1.4 million landlords, only half a million are registered with HMRC, despite the Revenue’s Let Property Campaign being launched in 2013, which allows landlords to put their tax affairs in order (source: HMRC).

hmrc

HMRC is cracking down on landlords’ undeclared rental income.

The campaign is set to last until spring 2015 and until then landlords may receive reduced penalties and also escape prosecution for non-payment of tax. HMRC’s aim is to collect the estimated £550 million that landlords fail to pay every year.

Treasury Secretary Danny Alexander said landlords must “pay up or face the consequences.”

If you think you might have underpaid tax on your rental property you can contact the Let Property Campaign on 03000 514 479.

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