Posts with tag: landlord taxes

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Published On: April 29, 2016 at 11:01 am

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Nationwide building society is updating its criteria for lending to buy-to-let landlords, ahead of changes to taxes for property investors.

Landlords who take out new loans from the society’s specialist arm The Mortgage Works (TMW) will only be able to borrow up to 75% loan-to-value (LTV), instead of the current 80%. They must also prove that their rental income is at least 145% of their monthly mortgage payments, up from the present requirement of 125%.

These changes were announced as landlords face a reduction in the amount of mortgage interest they can claim against tax, which will come into effect from April 2017. If you are concerned about how current and future tax changes will affect you, we have advice from finance expert Paul Mahoney, of Nova Financial: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Under the change, landlords that currently receive tax relief of 40% on their mortgage interest payments will see the amount cut to 20% over five years. Lenders have also been advised to consider the borrower’s costs associated with letting the property, including tax costs, when assessing affordability for loans.

Nationwide’s updated rules on rental income, coming into effect on 11th May, will mean that a landlord that makes £10,000 per year in rent will only be able to borrow £138,000, rather than £160,000.

Alternatively, if they wish to borrow up to £160,000 at 65% LTV, they must find a property that makes an extra £130 per month in rent.

The Managing Director of TMW, Paul Wootton, says the move is designed to help landlords strengthen their cashflow position “and help them withstand the impact of increased costs from the new tax regime”.

He adds: “As a responsible lender, this change is a pro-active move that recognises the need to help safeguard rental cover for landlords over the coming years, and in advance of the forthcoming changes to mortgage interest tax relief.”1 

The Director of Coreco mortgage brokers, Andrew Montlake, believes the change shows that lenders are starting to worry about how recent tax changes will affect landlords’ income in the future.

He says: “I suspect they will not be the last to change their rental calculations with this in mind, and landlords should review their portfolio and financing requirements sooner rather than later, as well as making sure they are aware of the very real effects these tax changes will have on their future income.

“The worry is that this will hit not just landlords, but tenants too in the form of higher rental payments, at a time when many are already stretched.”1

Other lenders have also been making changes to their lending criteria.

It is now almost a month since buy-to-let landlords and second homebuyers began being charged an extra 3% in Stamp Duty. The Association of Residential Letting Agents has expressed concerns that this is causing the level of rental property supply to decline.

1 http://www.theguardian.com/money/2016/apr/29/nationwide-tightens-lending-criteria-for-buy-to-let-landlords

Are Landlords Still Making Money from Buy-to-Let?

Published On: April 25, 2016 at 9:45 am

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Are Landlords Still Making Money from Buy-to-Let?

Are Landlords Still Making Money from Buy-to-Let?

Landlords have been hit by tax changes in recent months, with more planned for the future. As a result, just one in five believe that there is still money to be made from buy-to-let. So, are landlords still making money?

Research conducted by PropertyLetByUs.com – an online letting agent – shows that over half of landlords purchased buy-to-let property in the last three months to beat the 3% Stamp Duty surcharge, which came into effect on 1st April.

The study also found that 43% of landlords are thinking of turning their lettings businesses into limited companies to beat further tax rises next year. Recently, the Managing Director of the Association of Residential Letting Agents, David Cox, advised landlords to consider the benefits of doing so.

However, just 5% of landlords have sold their buy-to-let properties due to the tax changes, and only 6% plan to reduce their property portfolio and invest in stocks and shares.

Despite many stories of the death of buy-to-let, just one in six landlords have seen a reduction in their profits. Additionally, Nova Financial’s Paul Mahoney insists that buy-to-let is not dead: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The Managing Director of PropertyLetByUs.com, Jane Morris, says: “Our research shows that landlords are fairly upbeat about the buy-to-let market and many of them appear to have strategies in place to offset the tax hikes. Many landlords are opting for incorporation at the same time as raising rents.”

Indeed, rents have increased by 3% over the past year, and the majority of landlords are planning to put their rent prices up in the future.

Morris continues: “The surge in landlords investing in buy-to-let property in the first quarter of 2016 has created a bubble of new rental properties in some parts of the UK. However, in the longer term, it is likely that the tax changes will limit the supply of rental property and discourage potential new landlords from investing in the buy-to-let market. The good news is that tenant demand will continue to rise, as unaffordable house prices push home owning out of reach for many people.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Published On: April 18, 2016 at 9:02 am

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Categories: Landlord News

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The two landlords fighting forthcoming tax changes in the buy-to-let sector have launched the second phase of their crowdfunding campaign to help them challenge the Government.

Steve Bolton and Chris Cooper have hired Cherie Blair’s law firm, Omnia Strategy, to tackle the Government’s plans to reduce the amount of mortgage interest that landlords can offset against tax. They have also announced an event in London to support the challenge.

The Judicial Review of Section 24 – Tenant Tax campaign aims to raise an additional £250,000 to fight the Government in court. The initial crowdfunding round raised £50,000 in just eight days.

On 9th June, the pair will hold the Tenant Tax Summit – Landlords Fight Back event at the ILEC Conference Centre in Earls Court. Confirmed speakers include Lord Howard Flight and representatives from Platinum Property Partners, SpareRoom.co.uk, Shawbrook Bank, Property 118 and Property Tribes.

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

Landlords Fighting Tax Changes Launch Second Crowdfunding Campaign

The event will highlight the struggle of landlords and tenants, explaining how the new legislation will force many landlords to either sell their properties – therefore reducing the supply that the private rental sector needs – or raise their rents much higher – making renting even more unaffordable.

Bolton, the founder of Platinum Property Partners, and Cooper are calling on landlords, tenants, letting agents and others who will be affected by the new legislation to support their cause.

The campaign is now reopen for pledges via CrowdJustice (https://www.crowdjustice.co.uk/case/tenanttax/). It hopes to raise £250,000 to fight Section 24 of the Finance (No. 2) Act 2015.

Tickets for the London event are being offered to anyone who makes a minimum pledge of £100. Event costs are being covered by corporate sponsors, partners and patrons.

In February, the pair submitted a full application for a judicial review, and an Acknowledgement of Service was received from HM Revenue & Customs and the Treasury.

From April 2017, the amount of mortgage interest relief that can be offset against tax will be reduced to the basic rate for buy-to-let landlords. Those operating as limited companies will not be hit by the tax change, thus causing many landlords to consider setting up their business this way.

Bolton explains the importance of the campaign: “The days where nobody loves a landlord must come to an end. We need to unite to show that we will not accept the victimisation of landlords and tenants by the out of touch political elite. They are deluded if they believe that they will go unchallenged when trying to reclassify mortgage interest as anything other than a normal business expense.

“The tenant tax is wrong on every level, and if we allow a normal business expense to become a taxable expense for landlords, who will be next: Corporate landlords? Shopkeepers? Small business owners? Anyone who has used finance to help expand their business?”

He continues: “We aim to make the Tenant Tax Summit a very enjoyable, inspiring, interactive, uplifting, informative, educational and motivational day. It is a unique chance for our grassroots supporters to come together, support each other, share ideas and shout from the rooftops. We want to show politicians, the media and the country at large that we truly are a force to be reckoned with.”1 

Support the cause on Facebook: https://www.facebook.com/clause24/?fref=nf

 

 

 

Most Private Landlords Set to Increase Rents

Published On: April 15, 2016 at 8:31 am

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Categories: Landlord News

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The majority of private landlords are considering increasing rent prices to accommodate the higher taxes they now face, according to the Residential Landlords Association (RLA).

In a survey, the RLA found that 84% of landlords in the private rental sector are likely to increase rents following recent changes in the buy-to-let sector, introduced by Chancellor George Osborne.

Most Private Landlords Set to Increase Rents

Most Private Landlords Set to Increase Rents

The organisation also says that 78% of landlords feel the changes will deter them from further investing in rental properties, with half of all landlords thinking of getting rid of their investment properties.

This news arrives as estate agent Savills reports record demand for rental properties, predicting that one million new homes to rent will be needed by 2021.

The RLA believes that while less investment in buy-to-let properties may meet the Chancellor’s desire to free up homes for homeowners, these tax changes will make it increasingly difficult and more expensive for the large amount of people who cannot afford to buy, or who prefer not to, to access affordable housing.

In pushing up rents, the Government is in fact hitting those it is eager to support into homeownership, by making it more difficult for them to save for the high deposits they need.

The RLA is now calling on the Government to exempt all rental property making a net increase in the supply of new housing – new builds – from the 3% Stamp Duty surcharge that was introduced at the start of the month.

Some 39% of landlords said that they would be more likely to invest in new build rental properties if they were exempt from the higher tax rate.

The Chairman of the RLA, Alan Ward, says: “The Chancellor’s tax policies are impacting on tenants’ lives – not only are more than four in five facing rent increases, but half of landlords may be selling rented properties, which might result in tenants being given notice to leave their properties.

“Ministers need to end the myth that landlords are to blame for the country’s housing crisis and base policy on fact, not political expendiency.”1

If you are worried about how current and forthcoming tax changes will affect your lettings business, we have financial advice for landlords: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/ 

1 http://news.rla.org.uk/landlords-set-tover-higher-taxes/

 

HMRC and Treasury Respond to Landlords’ Challenge of Tax Changes

Published On: March 24, 2016 at 12:01 pm

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Categories: Landlord News

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HM Revenue & Customs (HMRC) and the Treasury have responded to the legal team representing two landlords challenging forthcoming buy-to-let tax changes. However, the comments cannot be made public.

HMRC and Treasury Respond to Landlords' Challenge of Tax Changes

HMRC and Treasury Respond to Landlords’ Challenge of Tax Changes

Back in January, we reported that Steve Bolton and Chris Cooper are calling for a judicial review of section 24 of the Finance (No. 2) Act 2015, which includes the planned reduction in buy-to-let mortgage interest tax relief.

Chancellor George Osborne announced the proposal in the summer Budget 2015.

Bolton and Cooper described the announcement as ending “a long-established principle of taxation that expenses incurred wholly and exclusively for the purposes of the business are deductible when calculating the taxable profits”.

The two landlords previously expected the response to their legal challenge to arrive by 16th March.

Now, they can confirm that the two Government departments have responded with an Acknowledgement of Service, which sets out the grounds on which the departments intend to contest the application for a judicial review.

On the campaign’s Facebook page, the landlords state: “We have received a reply from HMRC and HM Treasury. We now need to speak with our lawyers before issuing any form of statement to ensure that our case is not prejudiced in any way. Sorry we can’t share more at this stage, but it is critical we take legal advice and ensure we follow the correct protocols.”1

The landlords previously expected the response to be aggressive, but they cannot confirm whether this is the case.

Omnia Strategy LLP, the firm led by Cherie Blair QC, represents the landlords.

1 https://www.facebook.com/clause24/?fref=nf

 

 

 

 

 

 

 

 

 

 

 

 

Paragon Urges Chancellor to Make No Further Changes to Landlord Taxes in Budget 2016

Published On: March 16, 2016 at 9:45 am

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Paragon, a specialist mortgage lender, has urged Chancellor George Osborne to make no further changes to landlord taxes in the Budget 2016, which will be released today.

The firm also suggests that a full review of the UK’s housing requirements is conducted.

The UK’s population is predicted to grow from 64.6m in 2014 to 74.3m in 2039. But Paragon notes that with limited house building, reduced investment in social housing and a range of tax changes for private landlords, there is little prospect that quality, affordable housing will be available for all without directional action from the Government.

Paragon Urges Chancellor to Make No Further Changes to Landlord Taxes in Budget 2016

Paragon Urges Chancellor to Make No Further Changes to Landlord Taxes in Budget 2016

While homeownership is the aspiration of many, private landlords are increasingly housing the UK’s young adults that either cannot or choose not to buy, either because of mortgage affordability and strict criteria, or lifestyle changes and a requirement for flexibility.

It is believed that in 30 years’ time, 30% of all households in the UK will rent from private landlords.

So far, Government initiatives to encourage homeownership have been counteracted by reduced investment in local authority housing, a lack of support for housing associations through the Right to Buy scheme, and a complicated string of tax and policy changes for private landlords.

A leading financial expert explains the forthcoming, planned changes: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

The dangers of these changes are highlighted in an independent London School of Economics report, commissioned by Paragon, which argues that the private rental sector plays a key role in the UK’s housing system, and that any slowdown in private rental housing supply, as a result of changes in taxes and regulation, will put pressure on rent prices and household budgets.

The Chief Executive of Paragon Group, Nigel Terrington, insists: “The Government needs to instigate a thorough review of UK housing need in the context of the expected population growth. The size of forecast population growth is the equivalent of nine cities the size of Birmingham.

“The private rented sector is an important provider of homes for people in the UK. For many years, successive governments have actively reduced the provision of social housing. This, together with other regulatory changes, such as the Mortgage Market Review, which has restricted mortgage credit to homebuyers, means more people are turning to the PRS [private rental sector].”

He continues: “There is real risk of lasting damage to the sector if the impact of the changes is not fully understood, and particularly if the Government continues to layer one measure upon another without a thorough and robust assessment of the progressive impact different measures will have.

“The PRS does not have a binary relationship with homeownership; holding back growth in the number of properties for rent will simply not increase homeownership and may increase costs and reduce amenity for tenants.

“In the context of forecast population growth, together with a current and projected housing shortage, the key requirement is for the Government to create a stable policy framework that will encourage investment in the supply of good quality, affordable housing across all tenures, so that people can choose the best housing option to suit their lifestyle.”1

Chancellor George Osborne will present the Budget 2016 at 12:30pm today.

1 http://www.mortgagefinancegazette.com/latest-news/paragon-calls-for-housing-review-and-no-more-tax-on-landlords/