The next 12 months will be a challenging time for buy-to-let investors as tax changes take effect, the stamp duty surcharge continues to bite and new rules come into play with regard to lettings.
Landlords face changes to Mortgage Tax Relief which will be phased in from April 2017. The Society for Licensed Conveyancers has called on Philip Hammond, the new Chancellor, to reverse George Osborne’s Stamp Duty increase for additional properties and the changes to Mortgage Interest Tax Relief due to be introduced from April next year. Those changes increase the calculation of profit from the letting where the property is in mortgage and thereby increase the tax burden.
The property market has already been adversely affected by stamp duty changes introduced in April when an additional 3% was imposed for additional homes which meant that buy to let Landlords with more than one property came under the new tax rules.
Landlords wanting a buy to let mortgage will face new tough lending criteria in 2017. This means that buy to let lenders will be asking Landlords to have higher levels of rent relative to their mortgage costs although lenders will be able to factor in rent rises of up to 2% when deciding if a Landlord is able to afford a property. Landlords with 4 or more properties are required to supply more information about their income and overall financial position.
The Council of Mortgage Lenders figures show that Landlord borrowing was 21% down year on year in July whilst first time borrowers borrowing was down 19% month of month and 4% year or year. It will be interesting to see what the Chancellor’s autumn statement brings to this challenged sector of the property market.
Looking further ahead from 01 April 2018 there will be a requirement for most properties rented out in the private sector to have a minimum energy performance rating of E on an Energy Performance Certificate. Although there are a few exemptions a penalty of up to £4,000 will be imposed for breaches. Some Landlords are in addition still getting to grips with changes introduced to Tenancy Agreements and the requirements to give tenants information regarding their letting which were introduced in October 2015.
If you are affected by any of these issues please contact Mark Ollier.