Wealth Transfer Taxes – which way will they go?

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Inheritance Tax:

Most landlords have a keen interest in the inheritance tax
regime and how efficiently they may be able to pass on their assets to the next
generation.

With the average landlord portfolio at 12.4 properties in Q2
2018, down from a peak of 14.9 properties in Q3 2014, the average value would
be in the region of £1.61 million.

Of course, most landlords have less than three buy-to-lets,
but with their own residence (with the rise in house prices) and other
investments put into the equation, there is still likely to be a substantial
inheritance tax liability, and at 40% tax this is a painful tax bill for their heirs.

With all the political uncertainty at this time the way that
this tax burden falls on family assets in the future is at a crossroads: while
on the one hand a recent study by the Office of Tax Simplification (OFT) would
reduce the burden, Labour’s plans would be very much in the other direction.

Currently, with an estate worth more than £325,000 (or
£650,000 for married couples and civil partners), it is very likely that 40% of
the amount above the allowance will pass to HMRC on the event of the second
spouse’s passing.

Gifting

One of the more straightforward ways of avoiding inheritance
tax liability is to give away family assets while the giver is still alive. Whilst
it is possible to gift relatively small amounts (£3,000 per spouse per year),
for serious amounts of money a Potentially Exempt Transfer (PET) enables an
individual to make gifts of unlimited value. This gives exemption on a sliding
scale until it will become totally exempt from Inheritance Tax (IHT) if the gifting
individual survives for a period of seven years.

Putting assets into a trust and using business relief for
business assets are other ways of avoiding inheritance tax, but these are
complex areas, they are subject to regulatory risk (if the rules change) and therefore
require professional advice.

Office of Tax
Simplification Review

Of the 11 proposed changes set out by the Office of Tax
Simplification (OFT) review, published last week, designed to help the
government simplify inheritance tax (IHT), one of the suggestions was that family
members should be allowed to give away as much money as they like, tax-free, as
long as they live for five years – not the current seven.

Bill Dodwell, tax director at the OFT, has said that a
five-year window and increasing the annual exemption from £3,000 to £11,900 would
leave many families better off. In the last year The Treasury collected a record £5.37bn in inheritance tax receipts,
a 3% increase on the previous year.

Labour’s Plans

Shadow Chancellor, John McDonnell, in stark contrast to the
above, has confirmed the Labour party is considering the plans in its “Land for
the Manyâ€� report, to set a cap on transfers, its “lifetime allowance”
of £125,000, above which all transfers would be taxed as income.

Labour is looking to generate an additional £9.2 billion from
transfers which would, they say, lead to a “better sharing out of the unearned
windfalls arising out of the housing boom�.

An example quoted by The
Daily Telegraph would mean a teacher
who inherits a home worth £500,000 having to find £189,000 to pay the tax bill.

Conservative Party chairman, Brandon Lewis, says that the proposals
being considered by Labour, replacing the current system of inheritance tax
with a “lifetime gifts tax”, levied on cash gifts or homes and
businesses, could leave people on average incomes saddled with “eye-watering�
tax bills.

Inheritance Tax Rates

Office of Tax Simplification: Inheritance Tax Review

Land for the Many A report to the Labour Party, June 2019

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Wealth Transfer Taxes – which way will they go? | LandlordZONE.

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Standard Variable Rate differential to fixed is widening

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Moneyfacts UK Mortgage Trends Treasury Report reveals that the average two-year fixed rate in July 2017 was 2.26% and the current average standard variable rate (SVR), is currently 4.90%. These figures mean that this month, the average difference between the rates that existing borrowers have been paying on their maturing two-year fixed deals and the SVR that they will most likely revert to stands at 2.64%.

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Court of Appeal allow Landlords say on Right to Rent

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Landlords will have a major role to play in a court case considering the future of the government’s Right to Rent scheme.

The government has decided to appeal against a damning criticism by the High Court earlier this year that the Right to Rent breaches human rights law because it causes racial discrimination that otherwise would not happen.

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Can I claim for hail damage 12 months ago?

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May Bank Holiday 2018 there was a large hailstorm in our area which caused damage to a number of conservatory roofs including my sister-in-law and mother-in-law’s. They successfully claimed and have new roofs.

At the time I contacted my letting agent to ask them to contact the tenant in the property to have a look at the conservatory roof and report any holes.

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Across the board fall in cost of fixed-rate buy-to-let mortgages

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Buy-to-Let Mortgages:

There has been an unprecedented across the board fall in the
cost of buy-to-let mores according to the latest research from online mortgage broker,
Property Master.

Research out today (Monday, July 8th) from online mortgage
broker, Property Master, has shown an across the board fall in fixed rate
buy-to-let mortgage rates.  The fall
follows previous signs that the mortgage market was beginning to expect an
interest rate rise. 

Today’s news, which Property Master’s Chief Executive
described as “unprecedented�, follows on from recent remarks by the Governor of
the Bank of England that the UK leaving the European Union without reaching
some sort of trade agreement may well require some sort of economic stimulus
such as a cut in rates to weather the shock of no deal.

Angus Stewart, Property Master’s Chief Executive, said: “We
have been tracking buy-to-let mortgage interest rates in this way for 18 months
and we have never seen before a fall across the board in this way.  It is quite unprecedented.  Last month we were seeing a drift upwards in
the cost of buy-to-let fixed rate mortgages but it may be that the market is
now expecting rates generally to fall rather than rise.�

Mr Stewart continued: “It is likely that lower rates are
also being fuelled by the continuing increase in the number of buy-to-let
mortgage products.  Whilst it is true
some lenders have exited the market others are boosting their range and
competing hard for new business. 

As landlords continue to be pressed on all sides by rising
regulatory cost such as the new Tenant Fees Act and falling tax reliefs today’s
news of a lowering of mortgage costs will be very much welcomed.�

Property Master’s July 2019 Mortgage Tracker shows the
biggest fall in monthly cost was for five-year fixed rate buy-to-let mortgage
offers for 75% of the value of a property. 
The monthly cost of this type of mortgage fell by £36 per month June to
July.  

Five-year fixed rates for 65% of the value of a property
fell month on month by £6.  Five-year
fixed rates buy-to-let mortgage offers for 50% of the value of a property fell
by just £3 per month.

Two-year fixed rate buy-to-let mortgages for 50% and 65% of
the value of a property fell by £5 each. 
Two-year fixed rate buy-to-let mortgages for 50% of the value of a
property fell by £8 per month.

The Property Master Mortgage Tracker follows a range of
buy-to-let mortgages for an interest only loan of £150,000.  Deals from 18 of some of the biggest lenders
in the buy-to-let market including Barclays, BM Solutions, RBS, The Mortgage
Works, Godiva and Precise (full list below) were tracked.  Figures for this month’s Mortgage Tracker
were calculated on deals available on July 1, 2019.

Property Master was launched almost two years ago and aims
to shake up the buy-to-let mortgage market currently served by around 12,000
mortgage brokers.  It has already
attracted financial backing from a broad range of private investors including a
minority stake being taken by LSL Property Services, whose estate and letting
agency brands include Your Move and Reeds Rains.

Property Master has automated what was a manual, complex
process to provide landlords with a free easy to use mortgage search tool which
provides a mortgage quote that is pre-screened against each lender’s specific
and changing criteria.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Across the board fall in cost of fixed-rate buy-to-let mortgages | LandlordZONE.

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Places not just homes

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Building Better, Building Beautiful Commission publishes interim report: From the Ministry of Housing, Communities & Local Government and James Brokenshire MP.

Town halls should encourage the redevelopment of retail parks and large supermarkets into communities that include homes

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Competition among lenders lowers rates for landlords

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Buy-to-Let Mortgages:

Mortgage lenders have been reducing their lending rates,
providing some cheap mortgage deals to keep landlords in the market.

Over the last couple of years, landlords found themselves operation
in a tougher landscape, having to adjust to stricter lending criteria, the phasing
out of tax relief on mortgage interest payments over a four-year period to April
2020, and increasing letting regulations.

Last week the Halifax Building Society and Nationwide both cut
their buy-to-let rates, on some deals by 0.45%. Barclays joined in, reducing
some deals from 1.59% to 1.55% on a two-year fixed-rate mortgage with a 40%
deposit, and a reduction from 1.88% five-year fix to 1.83% and a minimum 25%
deposit.

Broker only platform, Mortgage Brain, informed the Sunday Times that the average 40% deposit
tracker mortgage is 3% cheaper than it was three months ago, and a 30% deposit
tracker deal is 2% cheaper than in March.

This equates to, for example, a landlord taking out a
£150,000 mortgage saving £234 per year with a 40% deposit, and £144 per year
with a 30% deposit.

Aaron Strutt of broker Trinity Financial told the Sunday Times:

“The buy-to-let market has taken a real hit – there simply
is not as much interest from landlords as lenders have been used to over the
years,�

“Lenders have been targeting the buy-to-let re-mortgage
market to drum up some business and, incredibly, they keep cutting rates to
tempt landlords in.�

There’s currently a record number (1,405 first-time
buy-to-let mortgages) of deals available to new landlords, indicating that the
new rules designed to tighten lending don’t appear to have shaken lenders’
confidence with new landlords.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Competition among lenders lowers rates for landlords | LandlordZONE.

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Is Shelter’s Campaigns Director beginning to see the light?

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Greg Beales was quoted on 2 March 2019 as saying: “Shelter research shows that almost one in three renters receiving housing benefit haven’t been able to apply for a home they wanted due to discriminatory practices ranging from ‘no DSS’ adverts to total bans on people receiving housing benefit.�

“But in the end

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Minimum 12-month tenancies for rentals in Wales

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Notice Periods:

The Welsh Government is planning a major reform to their no-fault eviction notice.

It would mean that the Welsh equivalent of Section 21 (Section
173 of the Renting Homes (Wales) Act 2016) will in future require six months’
notice instead of the current two months’.

The new plans, announced by Welsh Housing Minister Julie
James AM, will effectively extend the minimum tenancy term to 12-months by
default in some instance, regardless of the length of tenancy the tenant signs
up to. A six-month tenancy could in effect be a minimum of 12.

The Residential Landlords Association (RLA) says it is
scandalous that the Welsh Government is planning such a change without first
reforming alternative possession routes. This would affect the vast majority of
Welsh landlords who have legitimate reasons to repossess their property.

Under Section 173 of the Renting Homes (Wales) Act 2016, the
Welsh equivalent of Section 21, private landlords cannot repossess properties
in the first six months of the tenancy using the no-fault route, as is the case
in England.

RLA Vice Chair and director for Wales, Douglas Haig, has said:

“This is scandalous move that is essentially introducing
12-month contracts by default.

“Creating a situation where a property cannot be repossessed
within the first six months and then introducing a further six-month notice
period could cause huge problems for landlords.

“They will be left powerless when it comes to problem
tenants, who will be legally allowed to stay in the property for a year. If
tenants are not paying rent, huge arrears could build up in this time.

“We will be warning government that this move could cause
serious damage to landlord confidence and the availability of homes to rent in
Wales, at a time when demand continues to increase.

“The government needs to ensure that landlords with a
genuine need to regain possession of their properties are able to do so.�

The Welsh government will now consult on whether to increase
the minimum notice period of Section 173 from two months to six months, and on
plans to restrict issuing of a Section 173 for six months after the start of
the contract. 

• According to RICS’ most recent residential market survey, although the number of new landlord instructions is increasing in Wales, tenant demand is increasing even more. See the graphs on page 6 here

The Residential
Landlords Association:  represents the interests of landlords in the
private rented sector across England and Wales. It is home to over 50,000
landlords nationwide, with a combined portfolio of over a quarter of a million
properties.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Minimum 12-month tenancies for rentals in Wales | LandlordZONE.

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The flawed Call for Evidence over Tenancy Deposits

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The Government (or at least the Ministry for Housing Communities and Local Government (MHCLG))  has got it into its head to interfere with tenancy deposits to make it easier for tenants to move house. They have issued a Call for Evidence (CfE)

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