A Landlord's guide to 2017

With continued uncertainty in the long term Buy-to-Let (BTL) marketplace, currently the demand for private rented accommodation is still growing.

2016 was the year when the total housing wealth owned by the UK’s landlords overtook that held in mortgages of owner-occupiers, underlining just how important the private rented sector is to the UK’s housing market.

Malcolm Trewick

Thinking about investing in property as a landlord?

Whether you are an existing or first time landlord you need to be aware of a number of recent changes impacting landlords. You should also seek expert advice from your broker and where you feel necessary a tax expert or accountant.

The following information is provided as a guide and should not be taken as financial or tax advice

Tax changes

Many landlords will be aware of the uplift in Stamp Duty on buy-to-let and second homes, but fewer may be ready for the changes to tax relief that have been introduced this April. While landlords won’t see the impact until they get their tax bill in 2019, there is no reason to be complacent, and landlords should assess their portfolio as soon as possible in order to keep their investments sustainable.

Stamp Duty Land Tax (SDLT)

The government announced that from April 2016 higher rates of stamp duty would apply to second property purchases. BTL customers looking to purchase an additional property, where they already own either a residential property or a buy to let property, will be liable to higher rates of stamp duty.

The table here details the rates currently applicable:

Band

Existing residential SDLT rates

New additional property SDLT rates

£0* - £125k

0%

3%

£125k - £250k

2%

5%

£250k - £925k

5%

8%

£925k - £1.5m

10%

13%

£1.5m +

12%

15%

Taxation changes to treatment of mortgage interest and finance costs.

Currently landlords’ can deduct both mortgage interest and other allowable costs associated with a let property from their rental income before calculating how much tax is due. However, from April 2017 this changed, Landlords are only able to claim tax relief at the basic rate of tax (20%). So higher rate tax payers will see a significant reduction in profitability from a let property. Basic rate tax payers are unaffected.

Furthermore, tax relief will be given as a reduction in tax liability rather than a reduction to taxable income. The only positive message for landlords is that the changes will be phased in at the rate of 25% per annum, so it will be the tax year 2020/21 before the new tax rules will be fully integrated.

Tax changes are to be phased in and from April 2017 the following applies:

Tax year

Percentage of finance costs deductible from rental income

Percentage of basic rate tax reduction

2017/18

75%

25%

2018/19

50%

50%

2019/20

25%

75%

2020/21

0

100%



Energy efficiency ratings

From the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to have a minimum energy performance rating of E on an Energy Performance Certificate (EPC).

The regulations will come into force for any new let and when tenancies are renewed with effect from 1st April 2018 and for all existing tenancies on 1st April 2020.

It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless an exemption as set out in the regulations applies.


Useful links

The areas of change outlined above relate to recent and upcoming changes impacting landlords but there are many other things a landlord needs to be aware of.  The following  links will lead you to additional useful information to support landlords.