Tax rises hitting tenants in rented housing

Tax rises hitting tenants in rented housing

TENANTS in private rented housing are bearing the brunt of the Government’s tax increases on rented housing.

That’s the warning being issued by the Residential Landlords Association as research shows the supply of homes to rent is drying up whilst demand continues to be strong.

Data released today by the Royal Institution of Chartered Surveyors warns that whilst demand for rented housing from tenants “held more or less steady…for the third month running”, the number of landlord instructions “declined once again, rounding off a year in which they have fallen in all twelve months.”

The RLA is blaming the Government’s tax rises on the sector for the difficulties tenants now have in accessing suitable private rented housing. This includes the restriction of mortgage interest relief for the sector to the basic rate of income tax and a stamp duty levy which penalises the development of new homes to rent. This is despite the Chartered Institute of Housing recently noting that “tax reliefs deliver a much bigger benefit to home-owners than they do for private landlords.”

RLA Policy Manager, John Stewart, said:

“Whilst the Treasury seeks to dampen investment in rented housing, demand from tenants shows no signs of slowing down. Recent tax rises have served only to make the housing crisis worse.

“Rather than seeing it as a problem to be managed, the Treasury needs to develop a series of pro-growth tax measures that support and encourage the majority of good and decent landlords to provide the new homes to rent we desperately need. Otherwise tenants will find it increasingly difficult to find suitable homes to rent at affordable prices” 


RICS’ latest UK Residential Market Survey for December 2018 can be accessed here . It notes:

“In the lettings market, demand from tenants held more or less steady (on a non-seasonally adjusted basis) for the third month running. Alongside this, landlord instructions declined once again, rounding off a year in which they have fallen in all twelve months. Rental expectations remain modestly positive for the coming three months, with respondents pencilling in roughly 2% rental growth at the national level for 2019.”

In November 2018 CIH published a report on subsidies for different types of housing tenure. Details can be accessed here. It notes:

“Tax reliefs deliver a much bigger benefit to home-owners than they do for private landlords. Net tax relief for owners was some £29 billion in 2016/17 (£10 billion paid in tax; £39 billion received in tax reliefs). In contrast private landlords paid net tax of at least £8 billion.”

 The Residential Landlords Association: The home for landlords

The RLA represents the interests of landlords in the private rented sector across England and Wales. We’re home to over 50,000 landlords nationwide, with a combined portfolio of over a quarter of a million properties. A growing community of landlords who trust and rely on us to deliver day-to-day support, expert advice, government campaigning, plus a range of high-quality services relevant to their needs.


How can the empty housing crisis in England be improved?​

How can the empty housing crisis in England be improved?​

New research has shown that while England’s homelessness statistics are at a worrying high, empty housing across the country is also on the increase

With austerity measures causing more people than ever to tighten their belts and private rent prices soaring, many English cities have seen a rise in the numbers of rough sleepers and many are understandably concerned. Team that with the fact many properties lie empty and we are left with a crisis, in desperate need of change.

The total empty homes in England is currently reported to lie at over 600,000. Research shows a minimum of 4,500 people slept rough on England’s streets last year. But what can be done to improve this drastic imbalance?

The number of vacant homes in England rose in 2017 for the first time in ten years, according to research carried out by Attic Self Storage, and a third of the empty dwellings recorded are classifiable as long-term vacant. It’s important to note these houses are not only expensive properties owned by absent millionaires based abroad.

The research suggests that between 2013 and 2016, the North of England showed a higher volume of disused homes than the South, suggesting localgovernment may hold more responsibility than foreign investors for the number of vacant spaces.

One strategy that has been introduced to redress the balance is the much-talked-about £1 home scheme. This is where families with the means to renovate properties were sold houses in disrepair for one pound, on the promise they would commit to investing in the homes and remain in the property for ten years.

In many cases this involved better-off families relocating to deprived areas, in the hope of building both a home and a sense of community. 2018’s £1 house scheme was a source of controversy, but it seems hopeful that the project may have had a positive effect on empty property statistics.

Attic Self Storage’s findings break down the numbers of vacant dwellings by area, showing Liverpool and Camden to be among the regions where the percentage of empty homes is at its highest since 2013.

Since the government’s social housing projects have not always been reliable, it seems one of the best chances for England to address its housing crisis may be for local councils to make disused houses a priority. Kent County Council’s award-winning ‘No Use Empty’ scheme aims to bring empty properties back into use and raise awareness of the problems vacant homes can cause for local communities.

Another social enterprise in pursuit of fairer housing opportunities is Community Campus 87. The organisation began in the mid-1980s with the aim of buying vacant properties in the Middlesbrough area and rents them to previously homeless tenants for rates cheaper than social housing.

Given that some 440 homeless people died in England last year, for reasons including suicide, drug misuse and murder, the work of groups like CC87 – which also aims to get newly-housed tenants back into work and involved in community activities – is vital.

Several hundred other projects are underway across England and the rest of the UK to tackle the various issues surrounding homelessness, and while it is evident that dealing with the country’s housing crisis is a complex and ongoing process, empty homes cannot be overlooked as a factor in reducing homelessness.


‘Taxing’ Time for the 15,402 Coventry Buy To Let Landlords

‘Taxing’ Time for the 15,402 Coventry Buy To Let Landlords

Over the last twenty years, there has been a shift in the way the Coventry (and the UK’s) property market works. In the 1960’s, 70’s, 80’s and 90’s, a large majority of twenty somethings saved up their 5% deposit, went without life’s luxuries of going out and holidays etc., for a couple of years and then bought their first home with their hard earned savings.

By 2000, 47.1% of Coventry 25 to 29 years owned their own home (compared to 46% Nationally (and 65.7% of Coventry 30 to 34 year olds in 2000 owned their own home – again compared to 64.2% nationally) whilst the remaining youngsters mostly rented from the Council and in some rare cases, privately rented.

Now it’s 2018, and those levels of homeownership have slipped dramatically and now only 25.1% of Coventry 25 to 29 year olds own their own home and 44.2% of Coventry 30 to 34 year olds own their own home (interestingly mirroring the National picture of 24.5% for the younger age cohort and 64.2% for the older 30 to 34 year cohort).

There was concern in Government since the late Noughties that this shift from homeownership to private renting wasn’t good for the well-being of the Country and things needed to change, to make it a more level playing field for first time buyers. House prices needed to be more realistic and there needed to be a carrot and stick for both landlords and first time buyers.

In the 1980’s and 1990’s, interest rates were the weapon of choice of Government to cool or heat up the UK housing market – and it did work – up to a point. It’s just interest rates also affected so many other sectors of the UK economy (and not always a in good way). The policy of interest rates to control the economy is called ‘Monetary Policy’. Monetary policy is primarily concerned with the management of interest rates (and the supply of money) and is carried out by the Bank of England (under direction from the Government).

It’s just in this post Credit Crunch, Brexit environment, the use of higher interest rates wouldn’t directly affect landlords (as around two thirds of buy to let properties are bought without a mortgage). Therefore, an increase in interest rates would have hardly any effect on landlords and hit the first time buyers – the people the Government would be trying to help!

Also, given muted growth of real income (i.e. real income being the growth salaries after inflation) in the past few years, an uplift in interest rates (from their ultra-low 0.5% current levels) would have a massive effect on Brit’s household disposable income. Yet, over 90% of new mortgages in 2018 being taken are fixed rate and with such low rates, it has made buying a property comparatively attractive.

Instead, over the last 8 years, the Government has encouraged first time buyers and clipped the wings of landlords with another type of economic policy – Fiscal Policy (Fiscal Policy is the collective term for the taxing (and spending) actions of the Government). First time buyers have had the Help to Buy Scheme, Stamp Duty Exemption and contributions to their deposit by HMRC. On the other side the coin, landlords have had the way they are able to offset the tax relief of their mortgage payments against income change (for the worse), an increase in Stamp Duty (for the worse) and they will be hit with additional costs as the Government will be phasing out fees to tenants in the next 12 to 18 months.

So, what does this all mean for the 15,402 Coventry landlords?

The days of making money in Coventry buy to let with your eyes closed are long gone. There are going to be testing times for Coventry landlords, yet there is still a defined opportunity for those Coventry landlords who are willing to do their homework and take guidance from specialists and experts.

It’s all about looking at your Coventry portfolio (or getting a property professional to do so) and ascertaining if your current portfolio, mortgage and gearing are designed to hit what you want from the investment (because that is what it is – an investment) in terms of income now and income in the future, capital growth and when you plan to dispose of your assets.

I have seen many Coventry landlords (both who use me and my competitors) to manage their rental property or find them tenants – and on many occasions recently, I have told them to SELL – yes sell some of their portfolio to either reduce mortgage debt or buy other types of property that match what they want in the short and long-term from their investments. I know that sounds strange – but my role isn’t just to collect the rent .. it’s also to give strategic advice and opinion on the landlord’s portfolio to help them meet their current and future investment goals.

The opportunities will appear in the Coventry property market for Coventry landlords from gentler growth in property values linked with a restrained Coventry property market, meaning if you put in the time, there will be deals and great bargains to have. Many landlords in Coventry (both clients and non-clients) send me Rightmove links each week, asking my opinion on the suitability of the investment. Some are exceptional – whilst others are duds. The bottom line is, private renting will continue to outgrow first time buyers in the next 5 to 10 years and as we aren’t building enough homes in the UK, which means rents can only go in one direction – upwards!

Property Reflections

Property Reflections

With over a week passing since the budget and its finance bill now published the dust is starting to settle on The Chancellor’s latest announcements.

In reflecting on these there is one group of individuals which could have more reason than others to feel more than hard done by, landlords.

On top of all the changes in recent years – mortgage interest restrictions, increased capital gains rates, additional stamp duty land tax to name just a handful this budget included yet more for landlords to contend with.

Non-Resident Property Owners

As it stands at the moment where a non UK resident landlord disposes of a UK residential property then this needs to be reported to HMRC within 30 days of completion. Failure to make this notification can lead to automatic penalties which can soon escalate.

From 6 April 2019 this reporting requirement extends to disposal of all UK “immoveable” property not just residential property. In addition it also extends the definition to indirect disposals. For example this now captures the case where shares in a company which holds UK land are sold by a non UK resident individual.

Capital Gains Tax Payment Dates

Currently the due date for capital gains tax payments is 31 January after the year of disposal of the assets. Hence in the scenario where a property is sold at the beginning of a tax year the tax on this wouldn’t need paying until almost 22 months later. This budget has now introduced some new rules governing CGT payment dates coming into effect from 6 April 2020.

Stamp Duty Land Tax

The filing and payment period of SDLT returns is reducing from 30 to 14 days for all transactions after 1 March 2019.

A consultation is being released in January next year considering a 1% SDLT surcharge on all non-residents purchasing residential property. 

Principle Private Residence Relief (PPR) Reform

The above changes mainly seem to be administrative but the proposed changes to PPR and its associated reliefs will have the main impact in terms of tax.

Currently where a property has at some point in its lifetime been a person’s main residence then in addition to the actual period of occupancy they are also deemed to be occupying it for the last 18 months of ownership regardless.

The proposed change is to reduce this to 9 months.

In addition where a property qualifies for PPR and is also let at some time during the ownership of the property then an additional relief, known as letting relief is available. This can further exempt upto £40,000 worth of capital gains.

Letting relief in itself isn’t being abolished it’s simply the qualification for it. As noted above in order to qualify the property at some time during its ownership needed to be let. The new definition is now that it only applies in circumstances where the owner of the property is in “shared-occupancy” with a tenant.

As the majority of the time where this currently applies the landlord and tenant live in separate dwellings so the effect of the new qualification will be remove it in the majority of cases.

The tax impact of this will be significant as can be shown in the example below:

Assume that Mr Hylton has recently sold a residential property in Oxford for a gain of £100k which he had owned for 10 years. He lived in this property for 4 years before moving to Luton and purchasing another one. Between it ceasing to be his main residence and its sale he let it out to various tenants.

A comparison between the proposed new rules and existing rules are shown below:

To finish…..

So for a budget which some commentators stated didn’t have much in it, I would imagine most property landlords would disagree!

We are currently helping our clients to navigate through the changes announced in previous budgets and are currently exploring how we can help them through the recently announced changes so they remain not only tax compliant but also tax efficient. If you would like to see how we could you in the same way then please don’t hesitate to contact us for a free initial consultation.

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