The Government-proposed changes to the amount of mortgage tax relief landlords can claim – reducing it over 4 years from April 2017 to the standard basic rate of 20% - are being strongly challenged. Cherie Blair’s law firm, Omnia Strategy, recently sent a legal letter to the HMRC stating that the changes breach landlords’ human rights and Mrs Blair herself says she believes the campaign has a ‘reasonable chance of success’. The letter was issued on behalf of two landlords, who raised £50,000 via crowdfunding to fight the changes.
In addition to many landlords losing valuable investment earnings if the change comes in as planned, those who are basic-rate taxpayers may be pushed into a higher tax bracket as a result of the extra taxable income. The argument is that the new changes overturn a fundamental business principle where income less costs equals profit, meaning some landlords may have to pay tax despite making no profit from their letting business, and that with the new rules only applying to small landlords, not large ones, they are cutting across European competition rules.
Turning to our latest Buy to Let Index, it shows that 2015 was the fastest year for rent rises since 2011, up by 3.4% over the year to stand at an average of £794 per month by December. This rise is due to higher earnings combined with an ongoing lack of available housing in the UK. Adrian Gill, Director of Reeds Rains, comments, “The fact that the majority of tenants can afford higher rents is certainly good news, and should be seen as a positive indicator as we enter 2016. Yet over the longer-term, higher rents also raise a serious challenge for the future affordability of housing in this country.”
While most regions experienced a drop in rents in December, which is not unusual, Yorkshire & Humber and the West Midlands both saw a rise, taking their average monthly rents to all-time highs of £556 and £593, respectively. The East of England saw the highest annual rise, with rents up 7.8% on December 2014.
As prices across the country continue to rise faster than rents, landlords are seeing yields drop slightly, but overall returns increase, as the values of their portfolios rise. Adrian Gill says, “Gross yields have not been this low for more than five years. There will likely be a surge of investment ahead of the April deadline to beat the Chancellor’s new Buy to Let stamp duty surcharge – but beyond that and into the rest of 2016, lower yields may cool investment from landlords. In the short term, rising property prices might help some existing landlords to grow their portfolio, remortgaging to unlock fresh capital, but over time higher property prices will ultimately be expressed in higher rents – both of which demonstrate a shortage of housing in the UK. Landlords are part of the solution, as are millions of new homes.”
In recent news, a Welsh landlord has been issued with the country’s largest ever Rent Repayment Order, for failing to license six HMOs in Llandudno. He was ordered to repay almost £48,000 in housing benefit to Conwy County Borough Council, demonstrating how seriously the matter of proper licensing is being taken by the Residential Property Tribunal Wales. It is vital you comply with this legislation, as any landlord found to be operating an HMO without a licence may have to repay housing benefit they have received from the council.
It is also important you remember that, as of 1st January last year, it is your legal obligation to provide Dwr Cymru Welsh Water with your tenants’ details if they are responsible for paying the water bill. At the start of each tenancy you must inform DCWW of:
- The full name of each tenant
- The date of birth of the tenant/s – or declare if you don’t have this information
- The address of the property
- The date the tenancy started.
And you must tell your tenants that you are sharing this information with DCWW. If you fail to comply, you could be held jointly and severally liable for any unpaid bills, so do check this is covered with your local Reeds Rains office.
Our latest Buy to Let Index shows that rents in Wales rose by 1.8% in December 2015, which is positive news, however, due to falls earlier in the year, they are still 1% lower than in December 2014. Average yields stand at 4.2%.
Are you keeping your landlord register details up to date?
It is two years since the Landlord Registration Scheme came into force, requiring all landlords letting property under a private tenancy in Northern Ireland to register details about themselves and their properties.
It is important that you keep these details up to date, as you could be fined for incorrect information. Not only that, but if your contact details are not current, you may not receive the notice that is issued four weeks before your Certificate of Registration expires and therefore you may inadvertently slip off the register.
If you give false information or rent out a property without registering your details, you could be fined up to £2,500, so do make sure you keep all the following up to date:
- Your own full name, date of birth, address, email address and telephone number
- Your company registration number of the landlord is a company
- Your correspondence address, if different to the above, which must be in Northern Ireland
- The name and contact details of any joint owners
- The full address of each property and the date it was built
- The name, address and contact number of any agent acting on your behalf.
Amending your information is free of charge during the term of your 3-year registration. Simply log into your registered account at https://landlordregistration.nidirect.gov.uk/ .
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