Landlords are looking to use limited companies for purchasing property

In recent times there have been a number of changes that have directly affected landlords in the UK. If you’re a landlord you’ll know all about the tax changes and stamp duty changes, the tenant fees act and the proposed removal of section 21 which will stop landlords from removing tenants after the end of a fixed-term contract.

With the regulatory framework of the buy-to-let market continually changing, landlords are reacting. New research by Precise Mortgages shows that more than half of landlords intend to use a limited company to purchase properties in 2019.

Out of the landlords that were surveyed, 55 per cent stated that they would use a limited company structure to expand their portfolio, compared with 24 per cent who plan on purchasing more houses as an individual.

In the last quarter of 2018 the figure stood at 44 per cent followed by 53 per cent in the first quarter of this year showing that the number of landlords looking to use a limited company structure is continuing to rise.

Landlords with large portfolios are most attracted to using a limited company as 71 per cent of landlords with 11 or more properties are intending to use one, while 51 per cent of landlords with 10 or fewer will look to use one.

But if you’re currently a landlord or looking to take your first step into this area it’s important to seek professional tax advice before making a purchase. A specialist tax adviser will be able to help you decide if a limited company structure is the best for you and your personal circumstances. Your mortgage adviser can then find you the best mortgage deal and take you through the mortgage process from start to finish.

If you’re a landlord looking to expand your portfolio, or just want to talk through your mortgage options, contact one of our advisers today!

Record number of deals for first-time landlords

British landlords have seen many changes to the Buy-to-Let sector in recent years, some of which have driven some landlords to sell up. From the tenant’s fees bill, stamp duty surcharge and stricter affordability testing it’s been enough for some landlords to leave the market and look for alternative investment opportunities.

But what about first-time landlords? Is it all doom and gloom? Is it worth purchasing your first Buy-to-Let property when seasoned landlords are leaving the market?

If you’re thinking about purchasing your first investment property and becoming a landlord for the first time then right now may be a good time to consider your options. The number of deals available for first-time landlords has reached a record high, according to figures from Moneyfacts.

Over the past five years the number of Buy-to-Let mortgage options on offer for potential first-time landlords has more than doubled. In 2014 there were 645 deals on offer – compare that with a massive 1,405 deals that are available today! Providers are continuing to offer a wider selection of products amidst the current uncertainty in the property market.

In the past year alone, product numbers have increased by 137 and two-year fixed rates now start below 1.5%, Moneyfacts states. As well as this, for those of you who would be looking to fix your rate for longer, you could benefit from a significant improvement in rates over the past five years. The average five-year deal for firsttime landlords has fallen by 1.16% since July 2014, down from 4.68% to 3.52% today.

This is why, when thinking about purchasing your first investment property and becoming a first time landlord and being faced with so many options and having a host of different products available, seeking professional advice can be invaluable.

*Average deals and rates available correct as of July 1st

If you’re thinking of becoming a first-time landlord and want to discuss your options, contact one of our advisers today.

Brits abroad: expat landlords

How many Brits are living abroad is up for debate depending on which source you listen to. But one thing we do know for sure is that there are a lot of expats living right the way across the globe.

For working people, you may be lured away by an exciting new opportunity whereas for those of you at the end of your career, the desire to up sticks may be driven by the want for a change of pace and lifestyle in retirement.

Whatever the reason, you global adventurers often choose to keep a foothold in the UK property market – whether that’s renting out their former UK residence or purchasing a property to let. But, if you’re thinking of becoming an expat landlord there are a number of things you must consider:

The right mortgage
If you plan to move abroad and rent out your former home in the UK, it’s essential that you speak to your existing mortgage adviser and check if this is allowed under the conditions of your mortgage.

Your lender may specify a time limit for your return if you wish to retain your current mortgage, apply additional fees, a higher interest rate or request that you convert the mortgage to a consumer or regulated buy-to-let mortgage product. Landlords who are already abroad and want to buy additional property will need to look for an expat buy-to-let mortgage from the outset.

Landlord insurance
Although there is no legal requirement for landlords to take out insurance, your lender may require you to take out specialist insurance before you can let out your property. Make sure to speak with your mortgage adviser for further advice.

Managing your property
Dealing with tenants and maintenance issues can be a time-consuming and stressful process, let alone trying to deal with these problems from another continent in a different time zone. This is why it is important to ask yourself whether you’d be in a position to manage your property from abroad or would it be easier to use the services of a suitably qualified lettings agent?

Currency and foreign exchange
For you potential expat landlords you’ll need to consider foreign exchange rates and the potential risk of those rates changing if you plan to use the rental income to cover your living expenses. Rent will be paid into a UK bank in pounds sterling so it has the potential to be impacted by foreign exchange rates.

During 2018, for example, landlords who converted pounds to US dollars at the lowest point suffered a 12% reduction in spending power compared to those who converted at the annual high.

While this is just a brief overview of some of the things you might need to consider there are a number of other things to think about too. This is why seeking professional advice before becoming an expat landlord is important.

If you’re thinking about joining the many brits abroad and becoming an expat landlord contact one of our advisers today.

Government tightens up electrical safety rules for landlords

The government has sparked up a new idea so that everyone can feel safe and secure in their homes. The idea gives landlords greater responsibility to ensure that their rental properties are fit to live in for their tenants.

The new rule, that was announced in January, means that landlords must ensure mandatory electrical inspections are carried out in their private rental accommodation by competent and qualified inspectors, as part of the government’s commitment to drive up standards in the sector. Failing to comply could result in tough financial penalties.

There will be a transitional period in the first two years, whereby the new rule will only affect new private tenancies in the first year and then extend to all existing private tenancies in the second year.

Properties with an existing electrical installation condition report (EICR) will not be required to replace it for five years from its start date. And for new, fully rewired properties, an Electrical Installation Certificate can be presented in place of an EICR, provided the date of the next inspection mentioned on the certificate has not elapsed.

New guidance which sets out the minimum level of competence and qualifications necessary for those carrying out the inspections is to be published. It will provide clear accountability at each stage of the inspection process without excessive cost and time burdens on landlords.

Alongside the new guidance, existing “competent person scheme operators” will be invited to set up an electrical inspection and testing scheme which inspectors and testers can choose to join.

Councils will also have the authority to impose fines of up to £30,000 on rogue landlords who rent out poor quality properties from 1st June 2019.

If you want to discuss your options contact one of our advisers today.

Five tax rules landlords need to know

Landlord tax rules have seen some significant changes over the last few years. From stamp duty to capital gains tax, there are a number of different rules and reliefs that apply at every stage of the property life cycle.

As landlords it’s incredibly important to keep on top of your tax issues, so here we take a look at some of the major aspects of landlord tax and make sure that you’re up to date.

Stamp duty on second properties
From April 2016, stamp duty land tax (SDLT) on second properties, including rental properties, was increased to include an additional 3% surcharge over and above standard rates.

Anyone purchasing a rental property now pays 3% SDLT for the first £125,000; 5% instead of 2% on the portion between £125,001 and £250,000, and 8% on any amount above £250,001 – increasing the amount of up-front cash landlords need to buy a new property.

Tax on rental income
Until recently, landlords could deduct all finance costs from their rental income and profits were taxed at their marginal rate. However, starting from April 2017 and phased in over a four-year period, tax relief for finance costs is being restricted to a basic rate tax credit.

How these rules will impact you as a landlord will depend on your individual circumstances. However, there are a range of strategies to mitigate the affects of these changes, from resizing your portfolio to moving properties into a limited company – this is where seeking professional advice can be so invaluable.

Wear and tear allowance
Landlords with furnished properties can take advantage of a ‘wear and tear’ allowance to reflect the fact that furnishings need to be replaced regularly. Until recently, the allowance was set at 10% of gross rent but, following a change to the rules, landlords can only deduct the cost of new items against their rental income now.

Insurance premium tax
Landlords can expect to pay 12% insurance premium tax on any insurance they arrange associated with their rental property. While there is no legal requirement for landlords to take out insurance, mortgage lenders usually require specialist building insurance to cover the costs of rebuilding or repairing the structure of the rental property if it is damaged or destroyed by events like fire, storm, flood or vandalism.

Capital gains tax
Landlords are subject to capital gains tax on property sales. The size of the gain is usually the difference between the amount paid for the property and the amount achieved when the property is sold. Landlords can deduct costs associated with buying, selling and improving their property to reduce the gain so it’s important to keep receipts for all these items.

This article is only a brief overview of some taxes that may be applicable to landlords and should not be considered as an exact guide. Before investing in property or looking to restructure an existing portfolio, individuals should always seek expert advice from a qualified tax specialist. If you’re a landlord and would like to discuss your buying options, contact us today.

Over half of Buy-to-Let landlords want to keep or add to their investments

With the buy-to-let market showing signs of slowing down in the UK, new research by Octopus Choice has revealed that Britain’s landlords are in two minds about whether to continue investing into property or to sell up for a lump sum.

We Brits still have our continuous love affair with bricks and mortar and the data shows that 56% of buy-to-let investors want to keep or purchase more properties and continue investing. The remaining 44% intend on selling up and leaving the market.

Despite these stats, a substantial 22% of landlords are likely to sell their property within the next 12 months according to new research by The Mortgage Works – this is a 3% rise on the first quarter. And the rate of buy-to-let landlords planning to buy another property in the next 12 months has remained flat at 15%.

These figures suggest no one is entirely sure what the future may hold for buy-to-let as uncertainty continues to prevail, and landlords re-assess their investment options following a raft of recent changes.

If you are a buy-to-let landlord and want to discuss all of the options available to you, whatever your plans may be, contact one of our advisers today.

How can you improve your EPC rating?

With new standards on rental properties now in effect, landlords are working hard to ensure theirs are meeting the regulations on self contained flats and houses.

Those that do not could face fines of up to £5,000, unless their property meets the new minimum requirements on Energy Performance Certificates (EPCs).

What exactly are EPCs?
Energy Performance Certificates, better known as EPCs, let you know how energy efficient a property is. These are colour coded and resemble the sticker you often see attached to appliances such as fridges and freezers. These range from the most efficient “A” rating to the least efficient “G” rating.

EPCs will help a prospective tenant assess the financial running costs of renting a property, including estimates of energy use, fuel costs and CO2 emissions. As of last month, all rental properties must have an EPC rating of “E” or above.

How can landlords make improvements?
If a property is not up to standard, an Energy Assessor will make recommendations to improve the home’s efficiency. EPC ratings only consider permanent fixtures, so although draught excluders will help keep heat in, it won’t count towards your EPC.

Insulation – A really big contributor to a good EPC rating. If your property was built after 1920, it will likely have cavity walls, which means that as well as loft insulation, you may be able to install insulation inside the walls.

Windows – If your property does not have double glazing, this could have a major impact on its EPC rating. Installing double glazing can drastically cut energy bills, by preventing heat lost through windows.

Boilers – Installing a new, energy efficient boiler in the property can greatly affect the EPC rating of a property. This is especially the case if the boiler is over a decade old.

Energy – You may be considering moving to newer, renewable sources of energy for your property. The most common form is solar panels, which can allow the property to store energy, contributing to an improved EPC rating.

Thermal cameras – Some landlords have been using thermal cameras, to see where and how heat is escaping. With new technology available, it is now possible to purchase an attachment for your smart phone to have an instant thermal camera at your fingertips.

Future proofing your property
Landlords who make improvements to their property’s EPC rating could do more than meet the new standards. Having a property with a strong EPC rating will also help it stand out from the crowd, as tenants look to rent an energy efficient home to save costs.

If you are considering making changes to improve your EPC rating, it is always worth seeking professional advice. We work closely with lenders, so we can talk through your plans to make sure the changes do not affect your mortgage in any way.

Are you ready for April’s BTL changes?

After a busy 2017 for landlords, it may come as no surprise to hear that 2018 has more in store for the buy to let sector. As well as the second phase of tax relief reductions coming into force, there are two other new changes heading the way of landlords relating to HMOs and EPC ratings. 

Changes to HMO licensing
From April 2018 many landlords of Houses of Multiple Occupancy (HMOs) will require new licenses. At the moment,some 60,000 HMOs require a license, which may now increase by a further 174,000.

Since 2004, a landlord with a property housing 5 or more unrelated occupants, or with over 3 stories, had to apply for a license from their local authority. This will now apply to all HMOs, and will require a set of minimum standards on room sizes, waste disposal and storage to be met.

Those not prepared could find themselves needing to do work on their property in order to comply. As well as possible fines, Landlords who fail to catch up to the new rules in time may also find themselves with rooms they can no longer rent out.

These new changes could also create an income gap that will put even more pressure on landlords already dealing with several recent financial headwinds. Fortunately, there is likely to be a grace period of six months to adapt to the new rules.

New standards for EPC ratings
As of April 2018 it will be unlawful to let or lease a residential or commercial property that has an Energy Performance Certificate (EPC) rating of F or G. These changes are designed to improve the efficiency of homes in the private rental sector.

Although this will be a requirement of all new lets and renewals of tenancies, it will not be until April 2020 that the rules will apply to all tenancies. Landlords letting out a commercial property, or a house to a tenant, could face fines of up to £5,000 for non-compliance.

Older properties are likely to need the most work to bring them up to standard. Many will lack double glazing and are likely to have solid walls with no cavity for insulation. Landlords can often improve their EPC rating through insulation, boiler replacements, double glazing and cutting out draughts.

Problems may arise if a landlord is letting out a house or flat after April that does not have the required EPC rating of E, which may include renewing a commercial lease. This may cause issues as an EPC survey for the period between Q1 2008 and Q1 2015 showed that 35% of commercial buildings and 26% of domestic properties had a rating of E, F or G.

Would you like to discuss these changes and see what it might mean for your investment plans? Call us today to arrange a meeting and we can work through your options!

5 Factors that will Affect Housing in 2018

It’s time to gaze at the crystal ball and make predictions for the housing market in 2018. So what do we think are the
big factors that could affect homeowners, first-time buyers, and property investors this year?

Rates – Interest rates have become a hot topic after the Bank of England’s Monetary Policy Committee raised the
base rate from 0.25% to 0.5%. Although not a big climb, another increase is possible at some stage.
This would affect borrowers on standard variable rates and tracker deals, with those on a £175,000 tracker mortgage
seeing £22 added to their monthly repayments if the base rate increased to 0.75%. But borrowers on fixed rates will
of course see no change.

Housebuilding – Although a slightly maligned sector in recent years, government policies have helped drive a new
wave of housing development, with 217,000 homes coming onto the market in 2016-17.
This is up an impressive 20% on the year before, albeit still short of the government’s target of 300,000 homes a
year. But there are several indicators, such as increased construction activity, which suggests the numbers may
improve again in 2018.

Brexit – There are conflicting reports on how Brexit may affect the housing market this year. But the uncertainty
surrounding Brexit could very well have an effect on consumer behaviour, which means another unpredictable year
in store for homeowners and first-time buyers.

Buy to Let – As well as the next stage in the reduction of tax relief, there are now two more big changes coming the
way of landlords. From April, all landlords of Houses of Multiple Occupation will require a license, previously only
applied to those with property housing 5 or more unrelated occupants.
April again will see the beginning of new rules regarding Energy Performance Certificates, or EPCs. It will be now
unlawful to let or lease a residential or commercial property that has an EPC rating of F or G, which may cause
problems for landlords letting out a house or flat that does not have the required rating.

Housing Policies – The government’s flagship budget announcement that stamp duty has been abolished for first
time buyers on properties valued up to £300,000, will certainly help first-time buyers in 2018.
The Help to Buy Equity Loan, boosted in the budget with an extra £10bn of funding, will continue to support first time buyers. Young savers will also continue taking advantage of the Help to Buy ISA, which boosts savings by 25%
on monthly deposits of up £200.

If you would like further advice and information, speak to on of our advisers today!

Landlords Prepare for September’s Changes

The buy to let sector has seen a number of changes in recent years. This has been a challenge for landlords, lenders and advisers alike during a period of adaptability, flexibility and resilience.

But with the Prudential Regulation Authority’s (PRA) second phase of new underwriting standards for buy to let lending coming into effect on 30th September, there is further in store for the sector. Some lenders are already making announcements regarding their approach to buy to let portfolio lending, which means landlords need to prepare now.

What exactly is changing?
In line with guidance set out by the PRA, from 30th September 2017 landlords who have four or more mortgaged buy to let rental properties will be considered as portfolio landlords by lenders. The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account complex borrowing scenarios.

This will require the entire portfolio to be underwritten when applying for a new buy to let mortgage, even if the other mortgages are with a different lender. Lenders will also be required to use additional affordability tests on portfolio landlords and will require additional documentation to support applications.

How can landlords get ready?
Specialist lenders, already experienced in using a similar underwriting approach, have been clarifying their stance and assessment criteria. Outside of the specialist lending market, the majority of mainstream buy to let lenders have yet to confirm their plans, aside from The Mortgage Works who will continue to support portfolio buy to let lending going forward.

Industry commentators have raised concerns that the upcoming rule changes and a lack of support from larger buy to let lenders, could ultimately reduce the availability of loans to portfolio landlords and increase the price of lending.

There is likely to be more clarifications in the coming weeks leading up to 30th September and many experts are calling for quick clarification where possible. Landlords will need to keep up to date on lender announcements regarding portfolio lending. Depending on your situation, some of these stances may affect your current or future plans.

If you would like to find out more and get up to date on the upcoming PRA changes, contact an adviser to discuss.