Posts with tag: landlord tax relief

Letting Agents Could be Affected by Landlord Tax Changes

Published On: August 13, 2015 at 8:56 am

Tags: buy-to-let industry,landlord tax changes,landlord tax relief

Letting agents could be put out of business by Chancellor George Osborne’s plans to reduce landlords’ tax relief, according to a website.

saynotogeorge.co.uk is sponsored by a letting agent and states that with less income, landlords may stop using agents in a bid to make savings.

Letting Agents Could be Affected by Landlord Tax Changes

The website has launched a petition that opposes the plans to cut mortgage interest relief for private landlords.

The petition already has the 10,000 signatures it needs to require a Government response.

The website is the product of Peterborough landlord John McKay and is sponsored by Bee Lettings.

Yesterday afternoon, the petition had 10,892 signatures, meaning that the Government must issue a response. However, a petition needs 100,000 signatures for the Government to consider a Parliamentary debate.

The website states that the proposed changes could hugely affect letting agents: “Initially, letting agents may see the change in tax as a good thing because it will force rents up. In most cases, they earn a fixed percentage of the rents collected so they’ll see an increase in their profit.

“Unfortunately, they may also have to deal with a higher amount of tenant complaints about maintenance. As landlords are going to be hit badly by this tax increase they will have less money to spend on looking after their properties.

“The longer term consequences are likely to put many agents out of business. In the first instance, landlords will perhaps question whether they can afford to continue paying the agent’s fees and may consider taking their properties under their own management.”¹

Managing Director of buy-to-let mortgage provider, Mortgages for Business, David Whittaker, is slightly more optimistic.

He says: “Since the summer Budget, our experience is that both mortgage lenders and landlords are still extremely optimistic about the private rented sector in the UK.

“Changes to the tax system will not change the fundamental drivers of growth in the buy-to-let industry. Demand from tenants remains strong and healthy rental yields are providing a powerful incentive for further investment in homes to let.”

Find the petition here: https://petition.parliament.uk/petitions/104880

¹http://www.propertyindustryeye.com/petition-opposing-chancellors-summer-budget-plans-hits-10000-signature-mark/

Tenants Fear Rent Rises

Published On: August 4, 2015 at 1:53 pm

Author: Em Morley

Categories: Landlord News

Tags: landlord tax relief,private rental property,private rents,private tenancy agreement,rent rises

Around a quarter of private tenants are fearing rent rises after it was announced that landlords’ tax relief will be cut.

In the July Budget, Chancellor George Osborne revealed that tax relief on landlord interest mortgage payments will be reduced to the standard rate.

Tenants Fear Rent Rises

Landlords have voiced their concerns over these plans, but tenants are now worried about the impact these cuts will have on them. It is thought that the cost will be passed onto tenants through rent increases.

A survey of 1,000 UK tenants by Google Consumer Surveys on behalf of Makeitcheaper.com uncovers renters’ concerns.

The study found that 38% of tenants are feeling uncertain over how the cuts will affect them and over half would like greater rent controls to be introduced.

Worryingly for landlords, 35% of respondents said they would move to a different property if their rent did rise.

Already, tenants in the UK suffer some of the highest rents in Europe. Further rent increases would leave British renters paying much higher costs than those in other European countries.

If prices do rise, only 20% of tenants would stay in their current home. Shockingly, one in ten said they could be forced to seek council housing.

However, 17% said a rent rise would prompt them to buy their own home, which could be a positive.

Therefore, landlords could potentially lose 80% of private UK tenants, who would be unable to afford a price increase.

There are rules that landlords must stick to regarding rent rises, however, for example, landlords cannot increase prices during a fixed-term tenancy agreement before the end date without a tenant’s agreement.

Makeitcheaper.com has revealed how tenants would react to a rent rise:

How would a rent increase impact your current housing situation?

34.8% would seek a cheaper private tenancy.
20.4% would stay in their current home.
17.1% would be more motivated to buy a property.
12.7% would consider becoming a council tenant.
15% gave other options.

Removal of Wear and Tear Allowance Not Good for Tenants

Published On: July 30, 2015 at 10:51 am

Author: Em Morley

Categories: Landlord News

Tags: landlord expenses,landlord tax changes,landlord tax relief,wear and tear allowance

The Association of Residential Letting Agents (ARLA) believes that removing the 10% wear and tear allowance for landlords and instead applying tax relief on replacement furnishings will not help tenants.

Removal of Wear and Tear Allowance Not Good for Tenants

It argues that landlords could be less inclined to buy good furniture and furnishings initially, and that rents could rise as a consequence.

In its formal response to the Government consultation, ARLA states: “It is important to remember that most landlords are not cash rich.

“Most are heavily leveraged through buy-to-let mortgage products. As such, with house prices continuing to rise, net rental yields are only around 4% for most landlords.

“As the current wear and tear allowance is dependent on the amount of rental income received, we expect to see a rise in rents as landlords try to balance their books and recoup the lost revenue brought about by these changes.”

ARLA argues that the Government has not considered the impact of its plans on tenants, who would have to spend more of their wages on rent if prices increase, thus reducing the amount they can put towards a deposit, “and therefore putting the dream of homeownership further out of reach.”

ARLA also comments on the administrative burden that landlords will face when the new system is introduced in April 2016.

It says that “significant amounts of evidence” will be needed to claim the relief and guidance must be published to explain to landlords what they can and cannot claim for.

The group also reminds the Government that the current wear and tear allowance is applied to the initial cost of furnishing a property: “By withdrawing this relief, landlords will be faced with a larger financial burden… and may buy cheaper and less durable furniture and furnishings, knowing they will be able to use the allowance to replace poor quality furniture.”¹

¹http://www.propertyindustryeye.com/scrapping-of-wear-and-tear-allowance-bad-for-tenants/

Buy-to-Let Tax Changes Will Increase Rents

Published On: July 23, 2015 at 2:57 pm

Author: Em Morley

Categories: Landlord News

Tags: landlord tax relief,landlords increasing rents,rising rents,wear and tear allowance

Buy-to-Let Tax Changes Will Increase Rents

A study has confirmed the belief that the Government’s tax relief changes for landlords will cause investors to increase their rents.

In the July Budget, Chancellor George Osborne announced that mortgage interest tax relief for landlords would be cut to the basic rate of tax, currently 20%.

Furthermore, the wear and tear allowance is being changed so that it is no longer automatically granted at 10% of annual rental income, but on actual expenditure.

The survey by the Residential Landlords Association (RLA) reveals that 65% of landlords are planning to raise rents as a result of these changes.

The findings challenge HM Revenue & Customs’ (HMRC) view that these measures will have no significant impact on rent prices.

The RLA argues against Osborne’s claims that landlords are taxed more favourably than homeowners.

The RLA says that the Institute for Fiscal Studies (IFS) and the Policy Exchange have stated that this is incorrect. Unlike homeowners, landlords are taxed on rental income and capital gains.

Chairman of the RLA, Alan Ward, says: “The reality is that the Chancellor’s belief that rental property is taxed more favourably than homeowners is simply not correct.

“Rather than supporting the sector to provide the vital homes needed to support a flexible labour market, today’s Finance Bill will choke off supply and drive up rents.”¹

¹https://www.lettingagenttoday.co.uk/breaking-news/2015/7/survey-confirms-buy-to-let-tax-clampdown-will-raise-rents

RLA Announces New Policy Director

Published On: July 22, 2015 at 3:58 pm

Author: Em Morley

Categories: Landlord News

Tags: landlord legislation changes,landlord tax relief,RLA policy,RLA policy director

RLA Announces New Policy Director

The Residential Landlords Association (RLA) has appointed a new policy director.

David Smith succeeds Richard Jones, the highly regarded, long-term policy director at the organisation.

Smith will continue in his role as a partner and practising solicitor at law firm, Anthony Gold, and is a recognised expert in landlord and tenant law.

He is well known within the private rental sector and was recently the expert adviser to the Welsh Assembly’s Communities, Equality and Local Government Committee regarding its Renting Homes (Wales) Bill.

Alan Ward, Chairman of the RLA, says: “At a time of considerable change for the private rented sector, David’s experience and knowledge will be invaluable in guiding RLA policy and making representation to all levels of government.”

On Smith’s predecessor, Ward comments: “Richard’s contribution to policy making in the private rented sector has been immense and I am pleased that the RLA is not losing his experience altogether, as he will continue as a policy consultant and RLA company secretary.”

On his new position, Smith says: “I am delighted to join the RLA. With a new housing bill proposed and major changes to the tax regime, it is a challenging time for landlords.

“Private renting is crucial to meeting Britain’s housing need and supporting the flexible workforce the economy demands. However, as it continues to grow, it comes under greater levels of scrutiny.

“I look forward to leading the RLA’s policy work, to secure the best possible outcomes for our members and the private rented sector in general.”¹

¹http://www.propertyindustryeye.com/coup-for-rla-as-it-announces-new-policy-director-david-smith/

Treasury Analysis of Rental Market is Wrong, says IFS

Published On: July 16, 2015 at 12:44 pm

Author: Em Morley

Categories: Landlord News

Tags: Budget 2015 landlords,landlord mortgage interest tax,landlord tax changes,landlord tax relief

Treasury Analysis of Rental Market is Wrong, says IFS

Independent body, the Institute for Fiscal Studies (IFS), has stated that the Treasury’s analysis of the rental market is wrong.

Of the Chancellor’s decision to reduce mortgage interest tax relief for landlords, IFS Director Paul Johnson says: “At present, if you own a property that you let out to tenants, you can set any mortgage interest costs against tax due on rent received.

“The Budget red book states that this means that ‘the current tax system supports landlords over and above ordinary homeowners’ and that it ‘puts investing in a rental property at an advantage’.

“This line of argument is plain wrong.”

Johnson explains: “Rental property is taxed more heavily than owner-occupied property.

“There is a big problem in the property market making it difficult for young people to buy and pushing up rents. The problem is a lack of supply. This change will not solve that problem.”¹

¹https://www.landlordtoday.co.uk/breaking-news/2015/7/ifs-treasury-analysis-on-rental-market-is-wrong