RLA opposes plans to renew additional HMO licensing scheme in Cardiff

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The RLA has opposed plans put forward by Cardiff Council to renew an additional HMO licensing scheme in the city. Cardiff Council is proposing to renew an additional licensing scheme in the ward of Plasnewydd. Additional HMO licensing applies to HMOs which are not subject to mandatory HMO licensing but which are of a description […]

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Is Buy-to-Let Still a Good Investment in 2020?

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Demand from private tenants continues to grow with one in five UK households
today being rented. While the Government has imposed tax changes that have
reduced profits for many landlords, is Buy-to-Let still a good investment?

Hiten Ganatra, managing director of Visionary Finance,
says: “Despite efforts to stem the growth of the Buy-to-Let investment market,
many would argue it has shown some serious resilience. “It is still a
compelling story for investors.”

If becoming a landlord is on your list of things to do for the New Year
then here are the eight things you
need to know:

1. Understanding Tax

Rental income is added
to any other relevant income you earn during the financial tax year. You must
declare this income on a Self Assessment tax return each year. Certain expenses
can be claimed to offset against your rental income and reduce your tax bill. Though
landlords will only be able to claim basic rate tax relief
on mortgage interest at 20% from April – previously it could be claimed at a
higher or additional rate. The property income allowance means property owners
can earn up to £1,000 rental income tax free each.

2. Stamp Duty

A 3% additional rate
of Stamp Duty Land Tax
(SDLT) is now payable on purchases of additional properties such as Buy-to-Lets.

3. Find Buy-to-Let Mortgage Advice

When it comes to
finding a Buy-to-Let mortgage,
the benefits of using a broker is a no-brainer. While many UK brokers
charge a fee, choose a broker that offer their brokerage service completely
free like Visionary
Finance. They offer a whole of market service which means they have
access to over 60 different lenders including all mainstream and specialist Buy-to-Let
lenders. This will help to ensure you find the best deal suited to your
individual circumstance.

4. Calculate Rental Income

Working out your expected profits is an
important guide for calculating if the investment is worth your while. Make
sure you factor in stamp duty, solicitors fees, mortgage payments, agency fees
and maintenance when you crunch the numbers. You must also be prepared for
times when a rental property is empty.

The net yield is calculated after all costs
have been deducted – upfront expenses such as transaction charges and stamp
duty, and ongoing costs including everything from mortgage repayments on the
property to the income tax due on rental income. You can do some number
crunching using a Buy-to-Let
calculator.

5. Location Matters

Making sure your investment property is in
a desirable area will help ensure demand – and a consistent rental income. You shouldn’t buy in an area just because you
like it. The numbers need to add up.

The UK’s top cities for
Buy-to-Let investment in 2020 are (in order) Birmingham, Manchester, Liverpool,
Sheffield, Leeds, Leicester, Nottingham, Oxford, Cardiff and London.

Birmingham came in at number one because growth has outpaced all UK cities outside the capital in recent years, leaving a chronic undersupply of homes. As a result, property price growth has hit 19.3% since 2014 and Knight Frank predicts a further 12.5% increase by 2022. What’s more, the city has rental yields sitting comfortably between 4.4% and 5.3%, according to PropertyData. But do your homework on your preferred location and see how the numbers stack up.

6. Choose Your Rental Wisely

Purchase something that performs well in
the chosen market. Having plenty of space is an important feature listed by
tenants. Space is important to a tenant because it does not feel they are
outgrowing the property and choose to move on elsewhere. Having decent storage
will mean tenants enjoy a less cluttered home – and hopefully, they will stay
longer. Having equal sized bedrooms will be very important to sharers, while a decent
garden is crucial for families.

7. Ownership Options

The cutting of tax relief on mortgage
interest for landlords has prompted more to move their properties into
a limited company. If the property is owned by a company, all costs,
including mortgage interest payments, can be deducted as business expenses.

Profits incur corporation tax at a rate of 19% marking a significant cut
to a tax bill for higher-rate taxpayers.

As a landlord, you can draw income in the
form of dividends. In 2019-20 the first £2,000 of dividends is tax -free but
you pay tax on further withdrawals at 7.5% as a basic rate taxpayer or 32.5% if
you fall into the higher rate bracket. 

Setting up a limited company is something to take professional advice on. Getting a mortgage on a limited company-owned
property means getting a special deal from a lender. A broker can help you.

8. Don’t Forget About Resale

While investing in residential property is
a long-term commitment and Buy-to-Let investors don’t typically enter the
market with a view to selling, it’s important to have an exit strategy.

Should your circumstances change and you
need to sell up to access your capital at, it’s smart to ensure that the
property you buy can sell without any obvious complications. Market conditions
are, of course, out of your control.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Is Buy-to-Let Still a Good Investment in 2020? | LandlordZONE.

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A lost decade for house price growth, but affordability lags further behind…

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House Prices:

The 2010s decade has
seen the weakest house price growth since 1990s. Figures from
Savills, shared ex­clusively with The Times, and the
Nationwide’s research show that average house prices across Great
Britain have risen by 34 per cent over the past decade.

But this compares to
an affordability decline as average wages rose by just 20 per cent
over the same period.

Also, when adjusted for inflation over that period, the figures for average house prices would indicate a slight fall of 0.3 per cent, and affordability an even bigger one.

“There has been
practically no real house price growth across the country as a
whole,” Lucian Cook, head of research at Savills, who analysed
aver­age house prices from Nationwide between 2009 and 2019, told
The Times.

“That is
reflective of the fact that parts of the country have been left
behind until very recently. A lot of those lower-value markets in the
north of England are only returning to house price growth very late
in the day,” he said.

In a nutshell:

• House prices up
33% in 10s vs 180% in 80s

• London top
performer in 2010s with house prices rising twice as fast as UK
average

• Low interest
rates have helped support affordability through the decade

• High house price to earnings ratio make deposit a major barrier for first time buyers.

Forty Years of House Price Growth (source Nationwide)

Andrew Harvey,
Nationwide’s Senior Economist, has said:

“We’ve looked at
how the last 10 years compares with previous decades across a variety
of housing metrics. The 2010s has been the weakest decade for house
price growth since the 1990s; nevertheless, prices still rose by 33%
over the decade, somewhat above the 20% rise in average incomes over
the same period.

“Despite recent
weakness, London has been the top performing region over the last
decade, with house prices rising twice as fast as the UK average (at
66%). The neighbouring Outer Metropolitan region (which includes
places such as Slough, Guildford, Crawley and Chelmsford) also
significantly outperformed, with prices rising 54% during the 2010s.

“The northern regions, in particular the North, Yorkshire & Humberside and North West, saw relatively weak house price growth over the decade, with prices slow to recover following the financial crisis. House price growth has remained subdued in Scotland, with just an 8% rise over the past 10 years. Northern Ireland saw the lowest growth, with prices up 2% compared with the end of 2009.”

Growth Across the Regions in the 2010s (source Nationwide)

As the Nationwide charts show, price rises have been very mixed across the regions. Mr Harvey says:

“House price
growth has continued to exceed earnings growth, resulting in a
further rise in the house price earnings ratio. At the end of 2019,
the UK First Time Buyer (FTB) house price to earnings ratio stood at
5, close to 2007’s record high of 5.4, and up from 4.4 at the end
of 2009.

“The last decade
has also seen a significant widening in the gap between the least
affordable and most affordable regions. London been the least
affordable region for most of the past 40 years, but its house price
earnings ratio (HPER) has reached new highs in recent years, reaching
10.2 in 2016, from 6.1 at the start of the decade, with only a modest
improvement to 8.8 at the end of 2019.

“The region with
the lowest house price to earnings ratio in 2019 was Scotland with a
HPER of 3.2 – a decade ago it was the North with a HPER of 3.3.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – A lost decade for house price growth, but affordability lags further behind… | LandlordZONE.

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MP praises RLA campaign, RICS rent rise warning, mayor questioned and call on affordable homes

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In today’s politics roundup we look at the MP who is praising the RLA’s work in raising standards, RICS’ warning that an imbalance of supply and demand could see rents rise – and a call for more affordable homes to rent and buy. London mayor Sadiq Khan is also asked for clarification on housing targets. Buck […]

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Landlord supply stuck in negative territory – RICS

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Following the General Election result, the UK housing market has seen a lift in sentiment, according to the December 2019 RICS Residential Market Survey. Sales expectations have risen sharply, and a number of other key activity metrics have turned positive for the first time in several months.

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Class 4 NIC automatically generated on Tax Return?

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Is Class 4 NIC due on a UK property tax return?

I know this question was asked only last year by Benj, and in spite of having read all the replies (and links), I cannot understand why I cannot seem to remove the class 4 contribution calculation from my tax assessment this year.

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Government refuses Liverpool City-wide licensing scheme extension

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Landlord Licensing:

The new housing
secretary Robert Jenrick has turned down an application by Liverpool
City Council to extend Liverpool’s city-wide licensing scheme for
private sector landlords for another five years.

Currently, all
private landlords in Liverpool must obtain a licence for each of
their rented properties and since the introduction of the scheme in
2015, 70% of inspected properties in Liverpool have been found to be
in breach of their licence conditions, says the council. Included in
the reasons for the breaches were fire, electrical safety and excess
cold hazards, and according to the council all constituting serious
risks for tenants.

Around half of all
properties in some parts of the City of Liverpool are private rented
properties amounting to around 55,000 properties. Within these
numbers, the Council says it has carried out over 37,000 compliance
actions, it has issued over 2,500 legal and fixed penalty notices,
and taken to court almost 250 landlords.

Mayor of Liverpool
Joe Anderson has said he is writing to the government to express
“grave concerns” following housing secretary Robert Jenrick’s
decision to turn down the Council’s application to extend a
licensing scheme for another five years.

The Council says it
rejects the government’s assessment that its application “did not
demonstrate robust evidence to support the existence of low housing
demand across the whole city” and it is asking for more detail on
the basis of the Government’s decision.

Without this scheme,
the Council thinks it will not have the same powers to gain access to
properties to carry out inspections and enforcement, and the capacity
to carry out proactive enforcement will be severely diminished, it
says.

The Council has said
it may put up a legal challenge to the government’s decision.

Mayor Anderson says:

“This decision
flies in the face of the government’s tough talk on housing
standards, particularly around fire safety in rented properties.

“Over the last
five years our officers have come across people whose landlords are
happy to take their rent while allowing them to live in appalling
conditions with unsafe electrics, gas supply and no fire doors to
protect them in the event that a blaze breaks out.

“The landlord
licensing scheme has enabled us to create a team to be able to hit
the streets every day and carry out inspections of properties and
bring rogue landlords to book. It is not just about raising housing
standards – it is about protecting and saving lives.”

A Government MHCLG
spokesperson responded:

“Following careful
and detailed consideration, it was decided that Liverpool City
Council’s application for selective licensing did not demonstrate
robust evidence to support the existence of low housing demand across
the whole city.

“Liverpool City
Council was one of more than 130 local councils to recently receive a
share of £4.3m funding from government to tackle rogue landlords.

“We will continue
to support Liverpool City Council and other local authorities in
taking effective enforcement action as part of our commitment to
securing a better deal for tenants across the country.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Government refuses Liverpool City-wide licensing scheme extension | LandlordZONE.

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Declaration of Trust and Allowable Expenses

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Hello, I am the legal owner of a buy-to-let property with a mortgage. We have just welcomed a child and my wife is no longer employed and I would therefore like to submit a declaration of trust such that she will have to submit a tax return and pay tax on the profits from the Buy to Let.

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BLOG: Welsh Government gives indications as to standards required once Renting Homes is in force

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This week, the Government proposed detailed regulations for enforcing mandatory five-year electrical safety checks in the private rented sector in England from July this year.  In this blog first published on Anthony Gold, RLA policy director David Smith examines the indications given by the Welsh Government as to standards that could be required, once the Renting […]

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How should I best dispose of portfolio held in a UK ltd co?

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I am selling a portfolio of seven houses, some split into flats. The portfolio has been recently valued at around three million. It is held in a limited company that is owned by two shareholders who have held the shares since the eighties and now are looking to dispose of the asset for tax planning reasons.

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