Buy to let news to Friday, June 1st, 2018

Tortoise in shell

New survey gives landlords insight into adding rental appeal

New data reveals to landlords some of the issues that would make renting a property more appealing to a prospective tenant.

Top of the list, came pet permission, with 28% of the 3,000-plus tenants surveyed, indicating that they would be prepared to pay an average of £24 a month more in rent, to accommodate their pet.

The report, from LSL Property Services, also highlighted high-speed internet access as an important factor to would-be tenants, with 21% prepared to pay an average of £19 extra per month.

For those tenants who are sharing amenities, 41% said that they would be willing to pay an extra £20 a month for a communal gym.

On a more practical note, 34% of renters were prepared to pay an average of £10 per month for on-site laundry facilities.

Aside from having a gym, leisure also featured highly on tenant wish lists, with 32% of respondents happy to pay £10 a month for a communal garden and 27% keen to have a recreational or games room where they rent.

OTS proposes changes to taxation of dividends

OTS proposes changes to taxation of dividendsProposals from the Office for Tax Simplification (OTS) could affect the amount of dividend tax paid by landlords, who operate their buy to let property businesses in limited companies, if implemented.

In recommendations published on May 25th, the OTS, an independent office of HM Treasury, said that tax paid on dividend income is much less than for other forms of income.

Amongst its proposals to simplify taxation, is a shake-up for dividend taxation rates, with basic-rate taxpayers, who currently pay 7.5%, seeing the sharpest increase to 20%.

Higher rate tax payers, currently paying 32.5%, would see this increase to 40%, while additional rate taxpayers paying 38.1%, would have to pay 45%.

The limited company buy to let market has grown substantially in recent years, hitting an all-time high of 235 fixed-rate products in April 2018, according to Moneyfacts.

Whilst the proposals are not guaranteed to be introduced by Government, landlords operating limited companies will be casting an eye on developments.

We will be following this issue closely and will share updates as we have them.

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Government reinforces its tax position on landlords

Government reinforces its position over BTL taxThe Government has reiterated its reasons for enforcing a tougher tax regime on buy to let landlords, in response to an e-petition calling for the return of full mortgage interest relief and the abolition of the 3% stamp duty surcharge.

The e-petition, launched on May 14th, had attracted over 14,000 signatures by May 29th, prompting the Government to issue a response, as over 10,000 signatures had been accrued.

In its reply, the Government pulled no punches, issuing a stern defence of its decisions. It said:

“By restricting landlord’s finance cost relief to the basic rate of income tax we are helping to reduce the advantage landlords may have over homeowners in the property market.

“Income tax relief for finance costs is not available to ordinary homebuyers.

“It is also not available to those investing in other assets, such as shares, so we’re helping to reduce the distortion between property investment and investment in other assets.

“Previously, landlords could get relief on their finance costs at their marginal rate of income tax.

“By restricting finance cost relief to the basic rate, all individual landlords will receive the same rate of income tax relief on their finance costs.

“Landlords can still claim income tax relief at their marginal rate of tax on day-to-day running costs incurred in letting out a property, such as letting agent fees and replacing furniture.

“Finance costs are different to other expenses as having a mortgage allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without it.

“Using actual self-assessment data, HMRC estimate that only one in five landlords will pay more tax on their
property income because of this measure.

“We appreciate that some of these landlords may face difficult decisions.

“This is why the government has chosen to act in a proportionate and gradual way. Basic rate income tax relief will still be available on all landlord’s finance costs, and the government announced this change almost two years before its implementation.

“The restriction, introduced in April 2017, is being phased in over four years. This gives landlords time to adjust to the changes.”

Equally, the Government launched a defence of its position on the subject of Stamp Duty Land Tax, introduced in April 2016, as a charge of 3% on second home purchases.

“In April 2016, the Government introduced higher rates of Stamp Duty Land Tax (SDLT) for those purchasing additional properties.

“While it is right that people should be free to purchase a second home or invest in a buy-to-let property, the Government is aware that this can impact on other people’s ability to get on to the property ladder.

“The higher rates are part of the Government’s commitment to support first time buyers.

“Since the higher rates have been introduced, over 500,000 people have bought their first home, and first-time buyers make up an increased share of the mortgaged property market.

“At Autumn Budget 2017, the Government announced further changes to permanently increase the price at which a property becomes liable to SDLT to £300,000 for first time buyers, with first-time buyers purchasing homes worth between £300,000 and £500,000 saving £5,000.

“This relief means that 80% of first-time buyers will not pay SDLT, and 95% of first time buyers who pay SDLT will benefit from the change.

“Since its introduction, 69,000 people have benefited from the relief. Over the next five years, this relief will help over a million first time buyers getting onto the housing ladder.”

However, critics of the Government’s decisions have pointed to rising demand for rental property, falling availability of rental stock (as landlords sell-up) and consequently rising rents, creating difficulties for the tenant market, as a direct result of Government policy.

The Residential Landlords Association (RLA), stated on its website:

“The RLA is supporting the petition – which runs until November this year – and has been campaigning on both issues, asking Government to rethink what it claims is an unfair tax raid on landlords.

“Recent work by the RLA’s research arm PEARL found 69 per cent of landlords are being put off investing in further homes to rent as a result of the Government’s three per cent stamp duty levy on the purchase of homes to let.

“And analysis released by the Office for Budget Responsibility (OBR) in March confirmed tax increases are choking off investment in rented housing.”

The petition will run until November 14th, 2018.

If it reaches 100,000 signatures by November 14th, 2018, the petition must be considered for debate in the Houses of Parliament.

Rates round-up

Rates round-upBelow are the top 3 buy to let mortgage deals, by lowest initial rate, for fixed, tracker and variable products.

This table updates twice daily with the latest deals from a diverse range of specialist and high street lenders. Call our team to discuss any deal or click through for the full range.

Rate Product Monthly cost LTV Lender fee APR
1.37% then 4.99% Fixed for 26 months Fixed for 26 months £114 60% £2,239 4.69% Enquire
1.55% then 4.90% Variable for 26 months Variable for 26 months £129 60% £1,300 4.57% Enquire
1.49% then 5.00% Tracker for 24 months Tracker for 24 months £124 60% £2,178 4.76% Enquire
1.69% then 5.99% Fixed for 26 months Fixed for 26 months £140 70% £2,534 5.42% Enquire
1.60% then 4.90% Variable for 26 months Variable for 26 months £133 70% £1,300 4.58% Enquire
1.69% then 4.99% Tracker for 25 months Tracker for 25 months £140 75% £2,355 4.77% Enquire
2.94% then 4.99% Fixed for 24 months Fixed for 24 months £245 80% £1,825 4.94% Enquire
2.89% then 5.19% Variable for 24 months Variable for 24 months £240 80% £794 5.02% Enquire
3.85% then 5.35% Tracker for 24 months Tracker for 24 months £320 80% £2,155 5.43% Enquire
4.19% then 4.95% Fixed for 24 months Fixed for 24 months £349 85% £1,818 5.10% Enquire
4.64% then 6.58% Variable for 24 months Variable for 24 months £386 85% £3,110 6.74% Enquire

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.