CGT proposals to cost higher rate tax landlords £10,000 on average

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A leading lettings agency has revealed how much landlords will pay if the Capital Gains Tax (CGT) changes proposed by the Office of Tax Simplification (OTS) last week are implemented by Chancellor Rishi Sunak.

These would bring CGT – currently 28% on residential property and 20% on other assets – into line with income tax so that higher rate taxpayers face a flat rate of 40% or more.

It also suggests reducing the annual CGT allowance threshold from £12,300 to £5,000 or less.
Hamptons International has crunched the data based on the average equity held by a landlord within a property of £69,000.

For a lower rate tax payer, this would mean paying an extra £1,130 in CGT (or a total of £11,300) but for higher rate tax payers it would mean an extra £6,800 (or a total of £22,680).

“If the annual CGT exemption is also reduced from £12,300 (2020/21) to £5,000, a higher tax rate landlord’s tax bill would rise to £25,600, nearly £10k or 61% more than the existing situation,” Aneisha Beveridge, Head of Research at Hamptons International tells LandlordZONE.

Allowable expenses

These figures exclude allowable expenses, which vary significantly depending on whether and how long a landlord lived in a property before renting it out and how much money was spent doing it up.

But Beveridge says that the OTS’s  proposals would force more landlords to put their properties within a limited company structure because they still able to offset mortgage interest, and their profit is taxed at corporation tax, currently 19%. 

Mitch Young (pictured), co-founder of tax consultancy Fusion says the uproar about such radical changes caused by the proposals within the tax and property world might temper the Chancellor’s appetite for change.

“Nevertheless, there is no doubt that Sunak is going to execute some kind of tax raid in his next budget, so landlords need to get their houses in order before this happens next Spring.”

Read more: CGT proposals will drive more landlords out of the market.

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1.3 million private tenants worried about paying rent, says Rowntree foundation

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Millions of tenants are anxious about paying rent over the winter and 350,000 have already had discussions with their landlords about eviction, new research by The Joseph Rowntree Foundation (JRF) has found.

It has warned that without immediate targeted support, both private and social renters who’ve seen their incomes drop, will be at risk of real hardship and could lose their homes.

Some 2.5 million households are worried about paying rent in the next three months (1.3 million in the private sector), it says, with 700,000 already in arrears.

The social change group’s survey of nearly 3,000 tenants reveals that large numbers who have reduced spending to offset shrinking incomes are cutting back on essentials such as food (70%), heating and electricity (49%), and for renters with children, food for children and nappies (39%).

Legally binding

It says despite Government guidance not to employ the use of bailiffs before 11th January in England, this protection might not be legally binding or be properly understood by households vulnerable to eviction, who could feel they have no option but to leave their home if they get an eviction notice.

It’s calling for a watertight ban on evictions, together with targeted support for rent arrears to prevent a surge of evictions in the spring.

JRF also recommends a targeted grant programme designed to address rent arrears as director Helen Barnard says hard-pushed renters are running out of options.

“Without action which seeks to address growing arrears, any ban on eviction or enforcement only kicks the can down the road, with renters vulnerable to losing their homes again as restrictions are lifted,” says Barnard (pictured).

“A targeted package of support to address high rent arrears will give renters and landlords much needed breathing space as we continue to weather the storm.”

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Webinar: How to avoid underinsurance

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Watch our free webinar featuring Steve Barnes, Associate Director and Melissa Choules, Senior Claims Technician at Hamilton Fraser Total Landlord Insurance who are joined by Will Molland, Director of RebuildCostASSESSMENT.com. The latest data from RebuildCostASSESSMENT.com reveals that nine out of 10 properties in the UK are underinsured. This is a truly staggering statistic and our experts cover everything you need to know on the topic of underinsurance, from calculating your rebuild value to the true cost of underinsuring, to help you understand how to avoid underinsurance.

For additional information on underinsurance, read Hamilton Fraser Total Landlord Insurance’s comprehensive guide on the topic ‘How to avoid underinsurance: A landlord’s guide’.

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Rent Smart Wales issues re-registering?

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Anyone else having problems with Rent Smart Wales? On 23/10/2020 I received a reminder from them to re-register as my registration expired on 04/12/2020.

I went online on 26/10//2020 and re-registered and paid my fee of £36 and duly received receipts for payment.

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Leaseholders and service charge on different sized flats?

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The building split into 15 different sized flats is managed by a board of directors from the leaseholders. It has worked reasonably well, but now that the building is in need of updating and also some hefty repairs (roof) the directors have decided that they will change the way that the service charge is paid.

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NRLA confronts pensions minister over shared accommodation benefit rate shortfall

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Young people are being forced to choose between racking up rent debts and risking their health due to restrictive housing benefit rules.

The National Residential Landlords Association (NRLA) warns that under 35s who are relying on housing benefit to pay their rent for the first time have found that the shared accommodation rate only covers the cost of a room in a shared house.

It says this will force many into cheaper, shared housing with strangers, creating anxiety for those worrying about being infected with Covid at a time when people are being urged to spend more time at home.

In a letter to Welfare Minister Will Quince (pictured), NRLA chief executive Ben Beadle has urged him to adopt the Social Security Advisory Committee’s recent recommendation to suspend the shared accommodation rate rule, for at least a year.

Beadle (pictured, below) says it’s unacceptable that younger renters are being forced to choose between building debts or compromising their health during a pandemic.

“While the vast majority of landlords have done everything they can to support renters whose finances have been hit due to the virus, it cannot be right that landlords and tenants are left to muddle through without greater support,” he adds.

“If money can be found to subsidise meals out, the Government must find the finances needed to support tenants, and in turn landlords, to pay off rent arrears, sustain tenancies and protect people’s health.”

The call comes as Government statistics show a significant rise in the number of younger Universal Credit claimants; in the four weeks to 8th October, the proportion of claimants aged between 16 and 24 was 27%, up from 21% in the four weeks to 12th March.   

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Reluctant landlords: cladding woes force owners to let out properties at a loss

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Thousands of leaseholders are stuck in their flats because they cannot sell due to unsafe cladding installed on their high rise blocks. Sales are stalled because potential buyers can’t obtain a mortgage until the defective cladding is replaced and the building declared safe by a specialist engineer.

In desperation “trapped” sellers, many of whom are young couples wanting to start families, or wanting to move away for their work, are resorting to letting out the flats at a loss.

They are then forced into renting elsewhere, or buying a smaller and cheaper property than they would otherwise have gone for. Property experts say the situation is so common and so serious that with so much wealth tied up in unsaleable property, it is reducing demand and depressing prices further up the housing ladder.

Flat owners are having to become landlords or so called “accidental landlords” costing them hundreds of pounds a year in addition to their alternative housing costs. This is because the rent they can earn on their flats does not cover their mortgage and service charges.

In additional, they have the constant threat hanging over them that at any time they could receive a hefty bill running into thousand of pounds to fix the unsafe cladding.

A further issue for owners in this position is, they need permission from their freeholder and from their mortgage lender to let out their properties. What’s more, potential tenants will be urged to check out the fire safety situation of the building they are considering renting. There’s an obvious concern that they could be unknowingly signing contracts for potentially unsafe flats.

This could leave accidental landlords with vacant homes, plus they have a further risk that if tenants leave and they have a long void period they could find themselves in financial difficulties.

According to The Daily Telegraph Dr Lucy Coyne, 34, a vet, wanted to sell her flat in Liverpool to buy a house in Nottingham with her partner. But multiple sales attempts have fallen through due to the cladding issues.

So Dr Coyne was forced to rent out her flat, but the monthly rental income does not cover her mortgage and the building’s service charges and she expects to lose £600 every year until the cladding problem is resolved.

“I don’t want to be a landlord,” she told The Telegraph, “I’ve never wanted rental properties and I don’t want the stress of it”, plus she has the added cost of time spent managing and maintaining the property she no longer wants to own.

“My partner and I want to buy a property together in Nottingham, but we can’t because all my cash is tied up in my flat. Every time I think about the flat I just get anxiety and stress.”

There are significant costs and complications to becoming a landlord, and not everyone wants it is is prepared for it.

There are the additional fees mortgage companies sometime demand for letting, fees for energy performance certificates, legionella risk assessments, electrical and gas safety reports, smoke and carbon monoxide alarms, plus any upgrades needed to make the property suitable for rent. There may also be income and capital gains taxes complications to deal with.

All this not to mention dealing with agents or letting and managing the property yourself.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Reluctant landlords: cladding woes force owners to let out properties at a loss | LandlordZONE.

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43% of landlords say Covid risk still too high to complete face-to-face viewings

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Forty three percent of landlords have told LandlordZONE that they will not conduct viewings during the Covid lockdown at their rental properties.

Our Twitter poll, which was launched just before England’s lockdown was announced and closed yesterday, garnered 2,503 responses to the question ‘will you feel comfortable allowing viewings in your property during lockdown?’.

This reflects somewhat mixed messages from the government which, on the one hand, has said property viewings can proceed during the lockdown – provided these are undertaken in line with public health advice and the relevant Covid legislation – but on the other hand says ‘tenants’ safety should be the priority of letting agents and landlords’ and that viewings ideally should be virtual.

Virtual viewings

Research out today from 43-branch agency Andrews has revealed that a third of its viewings were conducted online rather than face-to-face last month.

This chimes with government guidance that urges, where possible, virtual viewings should be used before visiting properties in person in order to ‘minimise public health risks’.

“Landlords must follow sensible precautions to keep themselves safe when they or contractors or others are visiting the property,” the guidance says.

David Alexander (pictured) of lettings platform Apropos says: “Virtual viewings, as a concept, would have been laughed at a year ago but are now the norm.

“Our business has experienced a substantial increase in activity in the last four months with the number of new properties coming to our business achieving a record high.

“All of this was done online, and our new landlords and tenants were happy to work this way.”

Read more: Everything landlords need to know about Covid.

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Give students a rent rebate during Christmas, NUS leader asks landlords

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Students should get a rent rebate for leaving their accommodation early before the Christmas break, says the National Union of Students (NUS).

It’s calling on university providers and landlords to compensate the thousands of youngsters who’ve been told to go home during the ‘travel window’ between 3rd and 9^th December, just after lockdown ends, in order to reduce any transmission risk.

NUS president Larissa Kennedy (pictured) says those who follow this guidance should get some money off their rent.

“Now that it is clear students will be expected to leave term-time accommodation earlier than usual, we believe students who leave in the advised timeframe should receive rebates for the weeks they will not be in their accommodation,” she says.

Students have voiced fears about losing money from their part-time jobs and being able to afford monthly bills.

There is also concern that those who test positive for Covid in early December could struggle to shop and eat if they’re living alone, with the NUS urging that wellbeing support and free food should be available for them, including those in private housing.

Earlier this term, Glasgow University and Manchester Metropolitan University students who were locked down in purpose-built halls due to a spike in coronavirus cases, were given a rent rebate.

Last term, the Government urged landlords to consider whether they were treating student tenants fairly by continuing to charge them for empty accommodation – although this was for a much longer period.

Read more about rent rebates for students.
Read more: What does Covid mean for student landlords?

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Renting Vs buying a home in 2021

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If you are a property investor, should you buy or rent your own home?

This topic has been discussed quite a lot over YouTube recently and in this video I share a checklist of ten points that you should consider to arrive at the best decision for you!

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