Expat Landlords Tax Planning Opportunity

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This is a case study of how a couple are able to convert a massive tax headache into a £5,000,000 tax planning opportunity. You can read about a similar structure being used by UK resident investors via this link.

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Young Tenants being hit by Tax Hike on Landlords

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Landlord Tax:

ONE in five private landlords is now less willing to rent to young people as a result of tax increases being imposed according to new research published today.

With half of 16 to 34 year olds now living in the private rented sector, the Residential Landlords Association is warning that young tenants will be hit hardest by the changes as landlords consider moving out of the long term rental market.

Since April this year mortgage interest relief for landlords is being phased out to the basic rate of income tax only and landlords are being taxed on their turnover instead of their profit, unlike any other business.

According to the research by Sheffield Hallam University for the RLA, 19 per cent of landlords are less willing to rent to under-35s as a result of the tax increases. Previous studies have found that many landlords are moving to the short term holiday let market to avoid the tax increases, are looking to increase rents to cover the extra costs or are planning to sell properties so cutting supply for young people who need long term rental accommodation the most.

Following a commitment by the Communities Secretary, Sajid Javid, at the Conservative Party conference that the Budget next month would include incentives to encourage and support landlords offering longer tenancies, 52 per cent of landlords said tax relief for offering longer tenancies would make them more likely to rent to under 35s. 58 per cent said that reversing the mortgage interest changes altogether would make them more likely to do so.

Commenting on the findings, RLA Policy Director, David Smith, said:

“As Ministers work on a Budget aimed at supporting young people, today’s findings show that it will be this very same group that is hit hardest by tax rises on the private rental market.

“With many landlords considering changes to their lettings strategies to escape the hikes many young people will find it increasingly difficult to find the long term homes to rent they desperately need.

“Ahead of the Budget we are calling on the Government to scrap the tax hikes and support good landlords to develop the new homes to rent we need alongside all other tenures.”

• The RLA represents over 50,000 private sector residential landlords in England and Wales.
• The Sheffield Hallam University research for the RLA can be accessed here
• According to the 2015/16 English Housing Survey, 49.4% of all 16-34 year olds are in the private rented sector. Details can be accessed here
• Analysis by the RLA across the London has found that there has been a 75 per cent increase in the number of multi-listings on Airbnb between February 2016 and March 2017. Multi-listings are classed as individuals advertising more than one property on Airbnb. A UK wide survey by the RLA of almost 1,500 landlords has found that seven per cent reported that they had now started to offer properties as holiday/short term lets through Airbnb or a similar platform. These are properties that they would have previously been let longer term in the private rented sector. If this was reflected across the whole sector, this would mean a minimum of 134,400 private rented homes moving from the traditional private rental market to holiday or short let accommodation. Further details can be found in the RLA’s report here
• According to a survey of almost 3,000 landlords by the RLA 22 per cent plan to sell at least one of their properties over the next year, with just 18 per cent planning to buy additional properties to rent. This is despite 33 per cent having seen an increase in demand for homes to rent over the past three years. The research can be accessed here
• Research by BDRC Continental published in August found that 30 per cent of landlords have increase rents to cover the costs of increased taxation. Details can be accessed here

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Are landlords being left out in the cold…

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Winter Warning:

Landlords are being urged to take urgent action to avoid being left out in the cold this winter.

UK Landlords are being reminded by Upad to ensure that their investment properties are ready for winter, so that they avoid facing disgruntled tenants and potential void periods.  The warning comes after it was revealed that nearly half of private landlords fail to carry out routine maintenance on their portfolio before bad weather sets in.

Research carried out by online letting agent Upad.co.uk amongst over 4,000 private landlords shows how just 52% planned ahead by carrying out necessary checks during the summer months – a time when any issues can be rectified before they become more critical and when disruption to tenants can be kept to a minimum.

Speaking of the research findings, James Davis, CEO and founder of Upad and himself a portfolio landlord, said: “Whilst it’s encouraging to see a slight majority of private landlords investing the time and money to carry out certain routine maintenance checks, the fact remains that almost half are failing to do so.

“Those who don’t act in plenty of time, run the risk of any issues escalating and, therefore, costing more to rectify.  This is not only a drain on the landlord’s finances, but can also lead to unhappy tenants who may choose to look for alternative accommodation if the disruption becomes too much to live with.”

Amongst those landlords who do commit to routine inspections, 73% ensure checks and necessary maintenance are carried out on the heating boiler, yet only 55% extend this to all aspects of the heating systems including pipework and radiators.  A similarly low number extend their checks to outside the property with just 55% clearing drainpipes and guttering and 27% carrying out roof checks and maintenance.

Liz Williams, a Marketing Consultant from Ledbury, has first-hand experience of dealing with a mid-winter maintenance issue whilst renting a property:

“My husband and I moved to Herefordshire from London just before our first child was born and decided to rent whilst looking for our dream family home.

“Christmas fell just two weeks after Samuel was born and whilst we spent Christmas with family, we returned home on Boxing Day with thick snow on the ground to find that our boiler had stopped working.  Calls to the lettings agent proved futile given the time of year, but we fortunately had the contact details of the landlord who agreed to pay for a night in a nearby hotel for us.

“On returning home to be present for a constant stream of heating engineers, we found ourselves camping out in our lounge to keep ourselves and our new-born baby warm near the fire and an array of portable radiators.

“The boiler was eventually mended but we always felt the landlord himself should have had a better grasp on its overall working order and that he certainly should have been better prepared with the necessary contacts to call upon in an emergency situation such as this.”

John Socha has been a landlord for over 20 years and now operates a portfolio of 25 properties in Northampton.  For him, pre-winter maintenance checks aren’t just about avoiding inconvenience when things go wrong:

“Being on top of essential maintenance before bad weather sets in, isn’t just about maintaining positive relations with your tenants, as important as that is, it also makes sound financial sense.

“Far from taking a ‘sticking plaster’ approach when things go wrong, I’ve instead decided to invest up front to mitigate potentially more costly repairs at a later stage.

“For example, all of my properties with gas central heating are signed up to a yearly maintenance and servicing policy.  This not only means that it is regularly checked with any niggles rectified, but also that, should something go wrong, the tenant can call the engineer out, safe in the knowledge that they’ll have the issue dealt with quickly.  For me, I’m also reassured that there won’t be any of the extortionate costs that can be associated with emergency call outs

“Of course, issues aren’t always linked to the heating and so, once autumn leaf-fall is over, I ensure that all the gutters on my properties are cleared.  I’ve also recently changed all exterior lights to LEDs so that there’s less frequent need for bulb changes and have checked that outside taps are suitably insulated.”

James Davis concludes:

“Whilst it’s easy when you don’t live in a property to be less aware of its overall condition, we advise landlords to commit to regular maintenance checks and, therefore, avoid small issues escalating to larger, costlier, ones.

“John is a great example of this.  He appreciates that there’s no point in scrimping on essential maintenance and that small improvements and regular checks, can pay dividends via improved tenant relationships and less inconvenience all-round.”

For further information about Upad and its services, contact www.upad.co.uk or call 0333 240 1220.

See Also: Do you know if your property insurance cover is correct? – here

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Are landlords being left out in the cold… | LandlordZONE.

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Early release of agreement on sold property?

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I’m about to sell a house which is still tenanted. We have Exchanged and Complete in three weeks.

Out of the blue, my tenant has said he has to move because of his job, two months before the end of his tenancy agreement.

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Benefit tenanted properties to get energy grants…

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Energy Grants:

Private (BTL) landlords who rent to housing benefit tenants could be inline for help with energy efficiency grants as the government decides to support a programme to improve the EPC rating of properties inhabited by tenants claiming housing benefits (HB).

The idea behind the initiative, ahead of the impending legislation enforcing minimum energy efficiency standards next year, is to allocate a grans to housing associations, private landlords or tenants, where the current EPC rating of the property is E or below.

This would mean that those properties let to HB tenants which have is little or no insulation, or are powered by an old gas boilers, or oil, electricity or LPG could qualify for financial support to bring them up to current minimum energy efficiency standards.

This follows promises at the recent Conservative party conference to improve the lot of private tenants.

In those households that qualify, and apparently this does not include flats, energy suppliers will install a free replacement energy efficient boilers, and/or insulate the property’s walls or loft.

The energy suppliers will be contracted to carry out these installations in the qualifying properties, depending on the location and type of property, but the householder will not need to be an existing customer, as this obligation will extend to all UK households.

The Energy saving Group says that installing a new A-Rated Boiler will reduce carbon emissions and can save tenants around £300 per year on fuel bills. This will be a part of the Home Heating Cost Reduction Obligation (HHCRO) scheme or “Affordable Warmth Grant” which is aimed at addressing fuel poverty in across the UK.

These boilers have an efficiency rating of A and will provide heat and hot water using less fuel, thus reducing the home energy costs for tenants claiming benefits.

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