Posts with tag: wear and tear allowance changes

Homeowners who become so-called accidental landlords when they are unable to sell their home could be hit hardest by George Osborne’s buy-to-let changes.

The Chancellor announced in the Budget that buy-to-let investors will no longer be able to claim the higher rate of tax relief on mortgage interest payments of 45%, but will now receive the standard 20%.

Additionally, the rules regarding the wear and tear allowance have been tightened, meaning that landlords can only claim on money spent rather than the annual 10% of rental income currently offered.

Head of Residential Lettings at national property consultancy Carter Jonas, Lisa Simon, says that the changes could hit some landlords with a surprising penalty.

She explains: “Many properties in London and other major centres are owned by people who let them when their careers demand they move elsewhere for a time.

“Carter Jonas has a good number of such homes on its books – appealing properties that readily find good tenants.

“They are let by people who want to return but won’t sell up and move because house price inflation would bar them from making the same trip. So they let their home to cover the mortgage and rent in another location while they are temporarily displaced.”

Simon continues: “Among these people are civil servants, who will also face a 1% cap on earnings growth, moving away from major centres to advance their careers and who ultimately will want to return home.

“They now face a shortfall in their ability to pay the mortgage without raising their rents to cover the difference. It will mean they have to rise by more than the shortfall to cover extra income tax payments.

“The loss of a write-down on furnishings and maintenance, unless they can provide invoices, means that these people will have to suffer wear and tear on appliances and fittings that don’t necessarily break during the tenancy, but from which they get a shorter useful life because the tenants have been using them.”

She concludes: “The law doesn’t change until 2017 and we still have to see the fine print. There’s time for Mr. Osborne to clear this anomaly so that only those letting more than one residential property are subject to the change.

“It may have seemed a good idea but it hasn’t been thought through sufficiently well before becoming policy.”¹

¹ http://www.propertyindustryeye.com/accidental-landlords-to-be-hit-worst-by-chancellors-reforms/