OFFICIAL: How unpopular and damaging landlord tax changes have become

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Losing mortgage interest tax relief has prompted one in three landlords to think about selling up and one in four have raised rents.

New research from The Landlord Works for Nationwide reveals that 37% of landlords have considered selling rental properties as a result of the tax changes.

If found 77% feel the changes unfairly punish them, with the same percentage saying there should be more support for landlords especially post-pandemic.

More than a quarter (26%) of landlords with more than 20 properties have reduced their portfolios to reduce the tax impact, compared to 13% of those with between two and five properties. 

Less generous

Landlords could previously deduct mortgage interest costs from their rental income to help reduce their tax bills. However, this ended in 2020 and landlords now receive a tax credit, based on 20% of their mortgage interest payments, which is less generous for higher-rate taxpayers, who previously received 40% tax relief on mortgage payments.

The changes may also be forcing up costs for tenants, according to the research, with 25% of landlords having raised rents to cover the increased tax burden, jumping to 58% for those with 20 or more properties on their books.

Half of landlords are also struggling to keep up with the pace of regulation, while 38% find the new tax rules difficult and overly complex to understand.

Nationwide recently launched The Landlord Works, a free-to-use platform that helps landlords manage their properties in one place and navigates them through rules and regulations.

The Landlord Works director, Paul Wootton, says: “In recent years there have been numerous changes for landlords to get their heads around. Now with the loss of the mortgage interest tax-relief many are questioning whether to leave the sector all together by selling some or even all of their properties in order to help reduce their tax burden.”

Read more about mortgage interest relief.

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Profit Margins and expenses – there’s easier ways to earn a crust?

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When looking for a comparison of typical Private Rental Costs v Income I struggled. The Tax return asks for number of properties [SA105 box 1], Income from rent & property [box 20],

They ask for Expenses-
rent

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OPINION: Cardiff campaign to stop HMO is latest example of NIMBY attitudes

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Late last year I wrote a LandlordZONE piece that highlighted how the fast-expanding HMO sector, often restricted by local planning and licensing requirements, is being pushed into areas where – traditionally – they were rare.

This, I pointed out, has led to the growing phenomenon of HMO NYMBY-ism, which can prompt groups of residents to lobby local councils to reject HMO planning applications and/or bring in licensing schemes.

And a particularly misguided example of this can be found within the Cardiff suburb of Grangetown.

An application by local John Penketh – who is a professional landlord and Airbnb host – to run his own home (pictured) as an HMO briefly turned into an ugly local battle, with the landlord revealing he felt ‘utterly heartbroken’ and that campaigners ‘didn’t understand his plans’.

Although the campaigners involved were ultimately unsuccessful, when Cardiff Council’s planning committee met last week familiar arguments to reject were rolled out within a petition signed by 50 local people.

These were that the HMO would bring rats, rubbish, parking problems and ‘chaos’ to the area and, it was suggested, ruin the area’s neighbourhood feel, stability and cohesion.

Planners rejected these arguments, including supplementary ones that locals had not been consulted (which there is no statutory need to do) and pointed out that Penketh’s proposed HMO was the only one in the vicinity. The committee’s report notes that some areas of Cardiff do have high concentrations, but not Grangetown.

Friends house

The campaigners’ views came despite Penketh claiming he just wanted to live with his friends – a lawyer, midwife and lecturer – in the four-bedroom house and, due to local planning requirements, had to apply for approval.

“When we asked friends if they would like to move in with us, in a home we had made for ourselves in Grangetown, the last thing we expected was that it would become a council matter. We still believed that who we chose to live with was a real non-issue,” he told the South Wales Argus.

It later transpired that some of those who signed the petition apologised to Penketh after his reasons for applying to operate an HMO became clear.

The wider point is that because HMOs have a terrible but largely undeserved reputation, the gut reaction of many people is oppose them at all costs, viewing them as someone else’s problem.

What is very seldom debated is what people on low incomes who cannot afford or who are rejected by the PRS are supposed to do as campaigners seek to prevent more HMO properties being granted planning permission or licences. It’s something we’ve all got to think about.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – OPINION: Cardiff campaign to stop HMO is latest example of NIMBY attitudes | LandlordZONE.

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Council tax exemption on dilapidated purchase?

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A landlord client has bought a probate sale property that is not quite dilapidated but is barely habitable (depending on your definition of ‘habitable’).

There is central heating but no boiler. The place is filthy, and he intends to take the house back to the bare brick and completely remodel it

View Full Article: Council tax exemption on dilapidated purchase?

QUARTER of landlords have lost rental income due to Covid, new poll finds

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A quarter of landlords have lost rental income during the pandemic, a new YouGov poll conducted on behalf of the NRLA has found.

It asked over 1,000 landlords how Covid had affected them between March 2020 and September last year, discovering in addition that these landlords are twice as likely to be selling up their portfolios now, and that 36% of them intend to exit the market or sell parts of their portfolios.

Among the 23% of landlords who have lost rental income, this includes 11% who had negotiated rent reductions or temporary rent suspensions, eight per cent who had major issues with unpaid rents with at least one tenant and four per cent who had experienced an increase in empty properties during this time.

This, the NRLA warns, will further exacerbate the ongoing supply problems within the private rented sector and force up rents as tenants compete for properties.

Rent debts

The trade body also says this is further proof of the need to further help tenants get COVID related rent debts paid off to keep landlords in the market and tenants in their homes.

In October housing minister Eddie Hughes announced a £65 million rent payment support package for private renters facing eviction or homelessness ‘during the winter months’ and thanked landlords for their help supporting struggling tenants during the pandemic.

Ben Beadle, Chief Executive of the NRLA, says: “Today’s figures show the extent to which landlords have been hit by the pandemic as we have been warning over the last two years.

“With confirmation that those most affected are more likely to leave the market, it is vital that the rent debt crisis does not worsen the rental housing supply crisis we now face.

“As a matter of urgency, councils need to make use of the money they now have to help tenants get Covid rent debts cleared. Without this, renters face a bleak future of fewer properties to rent and, ultimately, higher rents.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – QUARTER of landlords have lost rental income due to Covid, new poll finds | LandlordZONE.

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ANOTHER landlord’s good intentions turn to horror – made worse by evictions ban

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Another landlord has told how the evictions ban scuppered her plans to evict a nightmare tenant and left her home uninhabitable.

Jenny Darroch rented the property out through Bournemouth Council’s landlord incentive scheme in 2019 as she wanted to support social housing supply.

It was then let through agents Homes4Let, a business operated by East Boro Housing Trust, until March last year.

The scheme paid landlords up to £2,000 for offering their properties to social tenants. Darroch said Homes4Let failed to take references and damage was caused shortly after the tenants moved into the house in Northbourne, a northern suburb of the Dorset seaside town.

The Bournemouth Daily Echo reports that after spending thousands of pounds in legal costs, Darroch finally got the house back but was shocked to discover it was infested with flies and rats, had widespread water damage, and rubbish had been dumped throughout.

She now needs to spend tens of thousands of pounds to get the property back in a suitable condition and has vowed never to rent it out again.

Proper checks

Darroch told the Echo: “If the council want private landlords to let their properties out they should ensure the proper checks and precautions are done. Landlords are not all bad. I let the property out to try to do a good thing.”

During the tenancy, both she and the agents were unable to gain access to the property for safety reports to be completed and to carry out repairs, while the council’s housing enforcement team had threatened her with action. She finally served notice at the end of 2020 but the legal process was delayed due to Covid.

East Boro Housing Trust sold the Homes4Let agency last year and Whites of Bournemouth took on the role as agent of the property; Darroch said Whites had done all it could to support her. An East Boro Housing Trust spokesman said it was carrying out a review into the issue.

Read about another case of bad referencing that led to nightmare tenants.

Pic Credit: Bournemouth Echo.

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Directors of dodgy property investment firm face probe after £800k goes missing

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A construction firm that fraudulently took over a million pounds from property investment hopefuls after offering fixed returns of 9.12% for three-year bonds and 10.35% on five-year bonds has been wound up by the High Court. Its directors also now face an official investigation over their conduct.

North London-based Exmount Construction Limited was registered with Companies House in 2013 and currently has a single active director listed, with a further five listed as having resigned. Its registered offices are within a secretive compound in North Finchley (pictured)

The Insolvency Service says victims of the company’s so-called investment schemes collectively handed over £1.1 million between March 2018 and July 2019 but after the money was deposited, they were unable to contact anyone at the company.

Missing money

An investigation by the Insolvency Service found no record of any money being used for actual property investments and approximately £800,000 was withdrawn by the company directors, or paid to other third parties.

During the investigation directors of the company refused to cooperate with officials and did not contest the winding-up petition.

Judge Briggs, speaking during the winding-up hearing, concluded the company “had traded in an objectionable manner”.

Edna Okhiria, Chief Investigator at The Insolvency Service, says: “Exmount Construction Limited induced investors by providing false and misleading statements in sales and marketing material to part with substantial sums of money to invest in property bonds with the promise of generous returns.

“In reality, this was a scam and we urge potential investors to carry out rigorous due diligence to ensure they use their funds on legitimate investments.”

The Official Receiver will now consider whether to take action against the directors in relation to their conduct and management of the company.

Read more about investment scams.

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New energy efficiency and electrical rules ‘too complex for landlords to understand’

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Peers have criticised updated energy efficiency legislation as being too difficult for homeowners and landlords to understand.

The Building Regulations (Amendment) (England) Regulations 2021 make changes to provide a “meaningful and achievable” increase to the energy efficiency standards for buildings.

These include a new way of measuring energy efficiency, changes in the regulation of on-site electricity generation to ensure it is appropriately installed, changes to address the risk of overheating in new residential buildings and provisions in relation to ventilation standards in new and existing buildings where building work is being carried out.

But the House of Lords’ secondary legislation scrutiny committee complained that the explanatory memorandum that goes with it, “assumes an extensive understanding of the current building regulations and how they are being developed and does not provide a proper stand-alone explanation of the full effects of the instrument or how the changes are expected to operate”. 

Complex and technical

Peers were forced to get extra information from the Department for Levelling Up, Housing and Communities, and felt strongly that members of the public should not have to consult other sources of information, especially when the subject was so complex and technical.

They have urged the department to revise the memorandum.  

Committee member Lord German says: “For an explanatory memorandum to fulfil its purpose, it must provide Parliament, those affected by changes in the law and the wider public with a clear and accessible, stand-alone explanation of the effect of an instrument and how it is intended to operate. 

The Building Regulations (Amendment) 2021 fail on this point and need to be revised accordingly.” The new building regulations take effect on 15th June.

Read the Lords report in full.

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REVEALED: Identities of landlord and tenant in shocking illegal eviction case

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A rogue landlord who chucked his tenant onto the street and threw out his belongings has been handed a suspended prison sentence.

Nur Miah Choudhury, from Bridgwater in Somerset, illegally locked out Ponciano Da Silva from the property in St Johns Street (pictured) while the tenant was working a night shift.

Mr Da Silva returned home early in the morning to find himself homeless.

Taunton Magistrates Court heard that the tenant had regularly paid rent and had believed he would get a month’s notice – which was in itself unlawful given the provisions of the Coronavirus Act to extend protection.

He had lost all his possessions during the eviction, many of which were personal and irreplaceable.

Choudhury had been told by Sedgemoor District Council’s housing team that he must abide by the law before the eviction and, by his own admission, had chosen not to do so.

Serious offence

Magistrates said that while they accepted the landlord had been ill, was of previous good character and ashamed of his actions, it was a very serious offence.

Choudhury was given a six months’ prison sentence (suspended for 12 months) and ordered to pay £3,000 in compensation to his tenant, along with costs of £250.

A council spokesman says: “The majority of landlords are very willing to work with the council and are compliant with their obligations to their tenants. However, the council will continue to crack down on landlords who not complying with the housing legislation which is in place to protect tenants.” 

Image credit: Google

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – REVEALED: Identities of landlord and tenant in shocking illegal eviction case | LandlordZONE.

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Will HMRC digital tax scheme not be fit for purpose as trial proves unpopular?

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Fears have been raised that landlords’ needs won’t be properly served by the new digital tax system for self-employed people due in 2024 after it was revealed that only nine people are taking part in the pilot.

HMRC admitted a sharp decline in the uptake of volunteers to test the new software since the trial began three years ago when 900 people signed up to take part, leading to concerns that the system might not be robust, reports the Financial Times.

Making Tax Digital for Income Tax will be used by 4.3m self-employed people from April 2024. Under the new system, about a third of taxpayers who are self-assessed and have either income from a business or property exceeding £10,000 per year will have to keep digital records of their earnings and expenses.

These will have to be filed to HMRC every quarter, using third-party software, instead of submitting an annual tax return.

Software providers and tax professionals said several factors were making it difficult to attract volunteers to join the pilot, including HMRC’s decision to limit it to volunteers who only have property or trading income.

Tax changes

Anish Mehta, managing partner at APARI, one of HMRC’s approved software providers for the new system, says landlords are often on the receiving end of tax changes.

“We want the MTD changes to be designed for landlords,” Mehta tells LandlordZONE. “Our concern with limited testing is that HMRC won’t understand what landlords need. For example, many landlords have other sources of income.”

However, he adds that most of the limited testing has been done by APARI users. “We’re very confident in our solution. One feature of MTD is that employment or pension income information can be pre-populated into APARI by HMRC.” 

HMRC said it had always planned to keep the initial numbers in the pilot low so it could “provide additional support to the first customers in the service before testing at scale”. It added that it planned to open up the trial to more people from April.

Listen to our recent webinar on the MTD initiative.

Read more about the MTD deadlines.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Will HMRC digital tax scheme not be fit for purpose as trial proves unpopular? | LandlordZONE.

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