Landlords can defer tax payment to 2021

Two pieces of good news for landlords arising from Covid-19 help. Tax payments can be deferred to 2021 and mortgage payment holidays have been extended by three months. New applications are also able to be made up to 31st October 2020.;
HM Revenue and Customs

HMRC have given good news to those who pay self-assessment tax bills on account. If Coronavirus has resulted in financial difficulty, making settling the second payment due by 31st July 2020 difficult, you can defer paying without interest or penalty.

You can defer outstanding tax payments to 31st January 2021. You can make payment at any point up to this date, if you wish to.

You can also pay in full, deferring is not mandatory.

How to defer your self-assessment tax payment

You do not need to inform HMRC that you intend to defer your second payment on account.

If you choose to defer, the only stipulation made is to settle the amount, by the January 2021 deadline date.

HMRC reminds those affected that there may be other tax payments due by this date:

  • balancing payment due for the 2019 to 2020 tax year
  • first payment on account due for the 2020 to 2021 tax year

You can check the details of your current tax position online. The log in page for the HMRC Government Gateway can be found here.

Direct debit payments

If you have previously set up a direct debit to pay tax, you will need to cancel it, to prevent payment being taken.

“Time to pay” instalment arrangements

Those using the “Time to pay” instalment schedule, who want to add their second payment to their arrangement, will need to contact HMRC.

  • Web chat with HMRC: To contact HMRC via web chat, visit the web chat page of the HMRC website here. Monday to Friday, 8am to 4pm, (closed weekends and bank holidays).
  • Call the HMRC Self-Assessment Payment helpline: Call an HMRC adviser on 0300 200 3822. Monday to Friday, 8am to 4pm, (closed weekends and bank holidays).

Will deferring tax make me ineligible for other help?

No. If you choose to defer your tax payment, you will not become ineligible for other avenues of support that HMRC are offering because of Coronavirus.

Good news for all self-assessment tax payers

Katharine Arthur, partner and head of private clients at Haysmacintyre chartered accountants and tax advisers, welcomed the news:

“HMRC have quietly adjusted the guidance but this is big news for individuals who don’t have the funds set aside for their July tax payment.

“The deferment will now assist all self-assessment taxpayers, not just the self-employed, who are suffering hardship as a result of the coronavirus including those with rental and investment income.”

Mortgage payment holidays extended

HM Treasury has announced that mortgage payment holidays, available to those struggling financially because of Coronavirus, will have the option of being taken for a further 3 months.

Not only this, but the application deadline has also been extended to 31st October 2020.

Anyone who is currently taking a mortgage payment holiday should hear from their lender ahead of the previous deadline in June, regarding their options.

The option to apply up to the end of October this year means that a success application, at that time, would affect payments through to January 2021.

Paying is in the borrowers ‘best interests’

The message from the Treasury remains that, if it is possible to, fulfilling mortgage payments is in the best interests of the borrower.

The FCA echoed this sentiment. Chief executive at the FCA, Christopher Woolard, said:

“Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

"Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday, will also continue to be able to apply until 31 October.”

Ultimately, any payment deferral or reduction has to be repaid. If this is over a long mortgage term, the impact may not be too great. However, the longer money is unpaid, the greater the impact of repaying it will be.

Since the original announcement in March, there have been in excess of 1.8 million mortgage payment holidays taken.

What will the options be?

Borrower options may include:

  • Resume mortgage payments
  • Resume payments and pay back the missed payments as a lump sum
  • Continue with a mortgage payment holiday for a further 3 months
  • Resume repayments but not the full amount
  • Switch from capital

The Treasury has told lenders to contact their customers about any ongoing arrangements. Borrowers may want to be proactive and contact their lender, or may wish to make a new application.

A list of buy to let mortgage lender contacts details can be found here.

Impact on credit file

Payment holidays taken as the result of Coronavirus must not appear on credit reports.

However, what about future borrowing?

Bank statements are commonly used to demonstrate income to prospective mortgage lenders.

It is not yet clear whether current or recent gaps in mortgage payments would affect lending decisions of other providers.

New safety regulations will stand

Despite efforts by the NRLA (National Residential Landlords Association) to delay the launch of the new “Electrical Safety Standards in the Private Rental Sector (England) Regulations 2020”, the government has said they will come into force as planned, from July 2020.

This means that, from July 2020, where new tenancies are concerned, the rental property must have had all electrical wiring and fixed appliances checked and signed off as safe, by a qualified professional.

Moving forward, these checks are required at regular intervals of no more than 5 years apart. The tenants must receive the results within 28 days of the inspection and the landlord is required to keep a copy until the next inspection.

From 1st April 2021, all rental properties will be subject to these checks, so properties for existing tenancies will have to be brought up to code.

Finding a qualified electrical inspector

The National Association of Professional Inspectors and Testers (NAPIT) has created a register of its members who can undertake this work.

NAPIT has also produced guidance for its members on what is expected of anyone undertaking the work, what the electrical safety report should include and supplying the landlord with a new reporting form so that the results of the testing can be easily provided to tenants and (where necessary) the Local Authority.

NAPIT’s Chief Operating Officer, David Cowburn, said:

“We are delighted that the Government have taken steps to make the requirements around verifying the safety of electrical installations in privately rented properties clearer. 

"The Government asked the electrical Competent Person Schemes, including NAPIT, to create a new registration scheme, which inspectors and testers can choose to join to demonstrate they satisfy the requirements of being competent and qualified as set out in the Regulations. NAPIT’s Electrical Inspector Scheme serves exactly this purpose and will act as a vital resource for landlords wanting to find qualified and competent people to undertake electrical safety reports for their properties.

"Landlord’s not using a registered inspector and tester will have a legal obligation to demonstrate that they are qualified and competent, and those trade associations and professional bodies representing landlords and letting agents are recommending the use of the registration schemes. Our Guidance has been created to support our members and ensure they are informed about what landlords need from the electrical safety report.”

The NAPIT search facility is available on its website here.

NAPIT’s guidance for its members highlights that the government regulations do not define what is meant by “qualified and competent”.

However, it is noted that landlords are recommended to have the work conducted by an electrical professional, who is a member of a trade scheme that verifies its members are competent.

Government approved Competent Person Scheme operators

NAPIT is not the only operator of the government-approved ‘Competent Person Scheme’.

The ‘Registered Competent Person Electrical’ website lists the following government –approved operators in England and Wales:

  • BESCA (Building Engineering Services Competence Assessment Limited)
  • BSI (British Standards Institution)
  • ELECSA
  • NAPIT (National Association of Professional Inspectors and Testers)
  • NICEIC (National Inspection Council for Electrical Installation Contracting)
  • OFTEC
  • STROMA

What to expect from buy to let

The light is on at the end of the tunnel. We are two weeks on from the government’s announcement that reignited the property industry. Everyone is asking what the future will hold.

Right now

Valuers are estimating a relatively short window for getting back up to full service; we expect to see processing times catch up in a month, maybe two.

This means that client cases that have been stuck, awaiting physical valuations, should expect a phone call over the coming weeks with good news and progress on their completions.

The strong steps taken by the government have mitigated the immediate impact of the Coronavirus on house prices. Furlough payments for staff and mortgage payment holidays and a ban on repossessions mean that forced sales (a product of recessions in the past) are – at least temporarily – put at bay.

Nonetheless, there is great uncertainty. This presents opportunity for investors.

The cost of borrowing remains exceptionally low and buy to let lenders are widening their offering to the market by the day.

Shrewd investors should look at yields and factor in a margin of variation from current market rents. No one knows what the ongoing economic outlook will be.

However, negotiating a reduction in price on a property purchase will improve the rental yield from what it would otherwise have been.

The mid-term opportunity

Right now, holiday let landlords may be switching to longer-term lets as the country is on lockdown, putting immense pressure on the leisure industry.

But, the pent up frustrations of the house-bound millions are just waiting to get out of their familiar four walls.

Going abroad is likely to be off the agenda for some time until there is far more consumer confidence, let alone government sanction for it.

Once lockdown lifts and the green light is given to move around geographically, the staycation market will be receiving booking requests hand over fist.

Within the traditional rental sector, some landlords have been exiting the market in light of tax and regulatory change, putting pressure on supply, which has the knock on effect of increasing rents.

This coupled with the fact that more people may be reconsidering buying homes, and looking more favourably on the flexibility of renting, means there is room for more rental properties in the marketplace.

The long-term opportunity

Property is the very definition of the long-term investment opportunity. Upfront costs mean it takes time for a property to pay for itself, and move into profit – which it may or may not do, depending on house price fluctuations.

Buy to let landlords have to be able to weather changes in the economy and in the industry.

Below is a graph of data taken from the UK House Price Index for average prices over the last 50 years:

Average UK house prices

Source: Contains HM Land Registry data © Crown copyright and database right 2020. This data is licensed under the Open Government Licence v3.0.

The overall trend is upwards; however, if you had bought property in January 2008, prior to the last financial slump, you would have had to wait around 6 years before prices got back to pre-recession levels.

Conversely, if you had bought in 2009, when prices were very low and retained your property for 5 years, your situation could have been exceptionally positive, by comparison, based on these averages.

None of these timelines can be predicted. Nor can investor circumstances, which may cause the need to sell at an undesirable time. So of course, there is risk involved.

However, if you compare other periods in time where there has been significant – or even steady - growth in house prices, the rewards are also clear.

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