Posts with tag: landlord finances

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

Published On: February 24, 2016 at 3:54 pm

Author:

Categories: Landlord News

Tags: ,,,,,,

Over the last few months, landlords have been subject to forthcoming changes to the buy-to-let market, which could dampen future investment. However, Savills believes that the private rental sector will continue to grow, despite the measures.

The Government has announced a series of policies designed to clamp down on buy-to-let investors and increase homeownership in the country. The changes to landlord law and finances are detailed here: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

The Private Rental Sector Will Continue to Grow, Despite Clampdown on Landlords, Says Savills

Despite the changes, demand for rental properties appears to be as high as ever, with the latest forecast from Savills suggesting that the sector will continue to grow for years to come.

The country’s strengthening economy and improved employment figures, which have hit an all-time high recently, would usually push up the number of homebuyers. However, the continuing surge in house prices – the average is edging closer to £300,000 – means that many people are still priced out of the property market, leaving the private rental sector in a state of constant expansion.

Savills reports that the Government’s statistics reveal the private rental sector has grown by around 17,500 homes per month for the ten years to the end of 2014. The firm believes that this growth will continue over the next few years, with Government policies designed to dampen the market having only a minimal impact.

Despite continued demand, private tenants may start to feel the pinch, as landlords are forced to raise rents in response to changes to their finances.

At present, there are 4.6m households in the private rental sector, with 260,000 added each year, says Savills.

But even with the Government trying to push for increased homeownership, it is only expected to bring around 40,000 new homeowners per year from the private rental sector, meaning that rental market growth will still continue, rising by only 15% less than the current level, at 220,000 per year.

With constant high demand expected for the sector, institutional investors are seeking clarity from the Government regarding their exemption from certain policies.

Originally, it was stated that institutional investors (those purchasing 15 or more properties in one transaction) would be exempt from the Stamp Duty surcharge arriving in April, but this has not been confirmed.

Additionally, landlords that operate as limited companies will not be subject to the cut in mortgage interest tax relief, set to be implemented gradually from 2017. Over 40% of landlords are looking at forming a limited company to avoid the change.

If large-scale investors are not exempt from the Stamp Duty surcharge, there is a risk of a lack of money, and therefore shortage of supply, coming into the private rental sector.

Do Your Tenants Receive Housing Benefit?

Published On: February 15, 2016 at 12:49 pm

Author:

Categories: Finance News

Tags: ,,,

If you rent a property to tenants on housing benefit, you may be aware of the new welfare system that sees six benefits rolled into one monthly payment.

This is called Universal Credit, and the scheme is being rolled out across the country. As well as combining housing benefit with other payments, landlords will no longer receive housing benefit directly. Instead, tenants will be responsible for paying their rent to their landlord.

Do Your Tenants Receive Housing Benefit?

Do Your Tenants Receive Housing Benefit?

Additionally, there is sometimes a long crossover period between the traditional welfare system and Universal Credit, which is seeing some claimants land in debt.

As a landlord, you should protect your investment by communicating with your tenants about any changes to their finances and consider rent guarantee insurance, which will ensure you still get paid if your tenant defaults on the rent.

Since January, we have been informing landlords of where Universal Credit is now live. You can find previous areas, and links to earlier roll outs, here: /more-housing-benefit-tenants-subject-to-universal-credit/

If you have rental properties in the following areas and your tenants are on housing benefit, be aware of the changes in place from today:

  • CM13 3 and CM14 5 in Chelmsford.
  • CR3 5, CR3 6, CR3 7, CR5 1, CR5 3, CR6 and CR8 5 of Croydon.
  • DE74 in Derby.
  • The E3 2, E3 3, E6, E7, E11 1, E11 2, E11 3, E12, E13, E15, E16, E18, E20 1, E20 1 and E20 2 parts of east London.
  • G44 3, G46, G53 7, G76, G77 and G78 in Glasgow.
  • GU1, GU2, GU3 1, GU3 2, GU4 8, GU5, GU6, GU7, GU8, GU9, GU10, GU12 6, GU26 and GU27 of Guildford.
  • IG1, IG2, IG3, IG4, IG5, IG6, IG7, IG8, IG9, IG11 0, IG11 8 and IG11 9 in Ilford.
  • KA1, KA2, KA3, KA4, KA5, KA6 6, KA6 7, KA13 7, KA16, KA17, KA18 and KA19 7 in Kilmarnock.
  • KT4 7, KT17, KT18, KT19, KT20, KT21, KT22 2, KT22 7, KT22 8, KT22 9, KT23 and KT24 of Kingston upon Thames.
  • LE12 5, LE12 6, LE14 3 in Leicester.
  • NG1, NG2, NG3, NG4, NG5 1, NG5 2, NG5 3, NG5 4, NG5 5, NG5 6, NG5 8, NG5 9, NG6, NG7, NG8, NG9 2, NG11, NG12, NG13, NG14 5, NG14 6, NG15 5, NG15 6, NG15 7, NG15 8 and NG23 5 in Nottingham.
  • PA2 8 of Paisley.
  • RH1, RH2, RH3, RH4, RH5, RH6, RH7, RH8, RH9, RH10 3, RH12 3, RH12 4, RH14 0, RH19 2 and RH19 3 in Redhill.
  • RM1, RM2, RM3, RM4, RM5, RM6 4, RM6 5, RM7, RM8 1, RM9 6, RM11, RM12, RM13, RM14 and RM15 4 in Romford.
  • SM7 1, SM7 2 and SM7 9 of Sutton.
  • TN8 AND TN16 2 in Tonbridge.

Keep up-to-date with all changes to landlord finances at LandlordNews.co.uk.

Tax Experts Express Confusion over New Wear and Tear Allowance

Published On: December 22, 2015 at 4:35 pm

Author:

Categories: Finance News

Tags: ,,,,

Tax Experts Express Confusion over New Wear and Tear Allowance

Tax Experts Express Confusion over New Wear and Tear Allowance

Tax specialists have expressed concerns over the new Wear and Tear Allowance system, saying that the rules are unclear.

The amendment, due to be enforced in April, will replace the current system that allows landlords of furnished properties to claim back 10% of their rental income against capital expenditure on replacements of furnishings, furniture, appliances, white goods and kitchenware.

However, the Allowance will be changed to actual expenditure, rather than an automatic 10%, next year. Draft regulations indicate that landlords will be capped on what they can claim, with the replacement being an equivalent, not an improvement.

The Association of Taxation Technicians insists: “We certainly expect to be seeking guidance on how HMRC will approach the question of whether a new item is substantially the same as the old item which it is replacing.

“If the new item is an improvement, which has to be treated for tax purposes as capital expenditure and not as a like-for-like replacement to be offset against rental income, the draft provision requires a restriction to the replacement expenditure.

“This position is particularly complicated in relation to items like white goods, where manufacturers are constantly introducing new technologies and functionality. We will be highlighting to HMRC the situations where we think that practical guidance will be needed to avoid disputed claims.”1 

However, the Association does welcome some of the new rules, particularly that landlords will be able to claim against the cost of removal of old items, such as fridges and mattresses.

The proposed revisions can be viewed here: https://www.gov.uk/government/publications/reform-of-the-wear-and-tear-allowance/reform-of-the-wear-and-tear-allowance

For the latest changes to landlord law, remember to check back on LandlordNews.co.uk daily.

1 http://www.propertyindustryeye.com/replacement-rules-for-wear-and-tear-rules-are-unclear-say-tax-experts/

Paragon Reports Buy-to-Let Lending Up 102%

Published On: November 26, 2015 at 3:44 pm

Author:

Categories: Finance News

Tags: ,,,

Paragon Reports Buy-to-Let Lending Up 102%

Paragon Reports Buy-to-Let Lending Up 102%

The parent firm of specialist lender Paragon Mortgages, The Paragon Group of Companies, has revealed its results for the year ending 30th September 2015.

The firm reported a 10.2% rise in underlying profit for the year, hitting £134.7m, from £122.2m in 2014.

Over the last 12 months, Paragon experienced a huge increase in activity, with buy-to-let lending reaching £1.33 billion, equivalent to 102% growth over the year, from £656.6m in 2014.

Its pipeline of new applications further highlights the increase in business. On 30th September, it stood at £713.7m, up by 72.1% on the same period last year.

Director of Mortgages at Paragon, John Heron, comments: “Access to retail markets through Paragon Bank has provided the group with a material diversification of funding. This has helped facilitate a step change in buy-to-let lending, driven by a significant broadening of our product range and a more consistently competitive position for both large-scale professional landlords and smaller scale property investors.

“It has been a fantastic year for the group overall and with our acquisition of Five Arrows Leasing through Paragon Bank, there will be more exciting opportunities to come.”1

Paragon’s figures indicate that landlords are still confident in the buy-to-let sector, despite a series of changes due for introduction in the near future.

Managing Director of Nova Financial, Paul Mahoney, has also “witnessed an increase in buy-to-let property investments” recently.

He continues: “Although the sector has endured some challenging changes on behalf of the Chancellor of the Exchequer, there is no disputing the returns that geared buy-to-let property investments have provided over the past 20 years; nearly tripling that of the FTSE all share index.

“With changes reducing the tax deductibility of mortgage interest and increasing Stamp Duty Land Tax, some may be a bit concerned regarding the impact.”

But Mahoney isn’t too worried: “Overall, the simple law of economics; supply (severe lack thereof) versus demand (increasingly strong) will prevail and property will continue to be a sound investment.”

Will you continue investing in property, or is your time as a landlord coming to an end?

1 https://www.landlordtoday.co.uk/breaking-news/2015/11/new-buy-to-let-lending-up-102-at-paragon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

Published On: October 12, 2015 at 2:16 pm

Author:

Categories: Landlord News

Tags: ,,,

The Residential Landlords Association (RLA) has called for buy-to-let investors to be given tax relief if they sell their properties to first time buyers.

Chairman of the RLA, Alan Ward, says the proposal follows David Cameron’s speech at the Conservative Party conference last week, which focused on a rise in homeownership. However, he adds that the plan would give landlords “a way out of the market”.

RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

RLA Calls for Landlord Tax Breaks if They Sell to First Time Buyers

He says: “With tax changes coming up that will severely impact on their incomes, a number of landlords will be looking to quit.

“A second group of landlords looking for a way out could be older ones, who may have held onto their properties for a very long time, and who now want to retire or who need the money for other things.”

Despite lobbying by the RLA, Ward reports that there is no sign of Chancellor George Osborne backing down on the tax changes announced in the summer Budget.

The plans will gradually remove the ability for landlords to offset mortgage interest from their rental income, with tax relief to be cut to the basic rate.

According to the RLA, this will mean that some landlords will pay tax on a loss.

However, it adds that landlords will also be hit by tax if they try to sell their properties now.

Capital Gains Tax (CGT), which landlords pay when they sell, is generally set at the higher rate of 28%.

It means that if a landlord purchased a property for £250,000 in 2005 and sold now, the CGT bill would be a huge £63,000.

Contrastingly, owner-occupiers do not pay any CGT.

After surveying landlords, Ward reports: “Selling to first time buyers or sitting tenants would be attractive to more than three-quarters of landlords, given the right tax environment.

“David Cameron’s speech lacked detail as to how landlords could be encouraged to sell and tenants to buy.”

The plan to let landlords off paying CGT if they sell to first time buyers was first announced in the RLA’s pre-election manifesto, which was released at the start of the year. It was aimed at all political parties in the run-up to the general election. The RLA also called for CGT relief when a landlord sells one rental property, but reinvests the funds in another.

Ward explains: “No other business that wants to reinvest would be penalised in this way.

“We also have to accept that markets change. For example, an area in south Manchester was popular with landlords investing in student property.

“Now that the [Manchester Metropolitan] university has moved its campus, those landlords could be usefully encouraged to sell up and reinvest, for example in city centre apartments.”1

Find out more about what was said at the Conservative conference: /prime-minister-to-promise-200000-starter-homes/

1 http://www.propertyindustryeye.com/landlords-ask-osborne-for-tax-break-if-they-sell-to-first-time-buyers/

Tax Changes to Hit Six in Ten Landlords

Published On: September 23, 2015 at 12:31 pm

Author:

Categories: Landlord News

Tags: ,,,

Six in ten private landlords say that the tax change announced in the summer Budget will force them to pay higher rates of income tax, rather than the basic rate.

Now, industry experts are warning that many landlords could leave the sector.

Tax Changes to Hit Six in Ten Landlords

Tax Changes to Hit Six in Ten Landlords

In the summer Budget, Chancellor George Osborne said that from 2020, mortgage interest relief for private landlords would be cut to the basic rate of income tax. This will be applied to turnover, not profit.

The Residential Landlords Association (RLA) points out that this means many landlords will face paying higher rates of income tax, despite their income not increasing.

In a survey of around 1,200 landlords, of those paying the basic rate of income tax, more than 60% stated that the changes would push them into either the higher or additional rate of tax.

The RLA has met with the Treasury to raise its concerns over the impact of the mortgage interest changes, insisting that it will affect landlords’ ability to invest in much-needed housing.

Policy Director at the RLA, David Smith, says: “The findings of our survey are deeply concerning. Many landlords currently paying the basic rate of income tax face the prospect of a nasty surprise when they meet with their accountants.

“Having felt that they were not affected by the Budget measures, many will seriously consider whether it is worth continuing in the market when faced with this tax bombshell.

“It cannot be right that many landlords face seeing their income tax increase without an increase in their income.

“All the evidence shows that we need more, not less, rented housing. With almost 90% of landlords being individuals renting out just a handful of properties each, it is only by supporting this group that we will boost the supply of homes to rent.”

Smith adds: “The Budget announcements risk undermining the potential for growth.

“Even at this late stage we are calling on the Government to pause and provide more time to assess the impact on market.”1

1 http://www.propertyindustryeye.com/tax-bombshell-awaiting-six-out-of-ten-private-landlords/