CP Hanbury Wealth Management teamed up with LJ Hanbury Accountants and Tattershalls Lettings to deliver an update on the ever changing environment for landlords. The event attracted a diverse group of landlords, some with a large mixed portfolio of commercial and residential, others with a smaller portfolio of buy to lets and HMO’s, all wanted to understand the changes in taxation and licensing that could affect their business/ income.
The key points from the meeting were as follows:
* Interest on mortgages – Up until 2017 this was tax deductible but from 2020 this will no longer be the case, although there is a basic rate (20%) relief, for higher and additional rate tax payers this could have a significant impact on their profits as they will be taxed on a larger sum. More news on this particular point will follow in a separate article over the next few weeks.
* Rent a room relief – This was one of the few positive changes. You can now rent a room in your primary residence with up to £7,500 being non-taxable. This was previously £4,250.
* Stamp duty – From April 2016 stamp duty land tax for second and subsequent properties is going up by 3%. If you buy a new home and decide to rent out the old one you will have to pay the higher rates on your new home! If you sell your old home within 3 years you can claim back the 3% extra you have paid. See below rates:
|Threshold £||Existing rate of Stamp Duty||New rate of Stamp Duty|
* Making tax digital - MTD will soon be upon us, why not look at moving towards detailed spreadsheets to manage your property income/expenditure (if you don’t already). If you are not aware of making tax digital and what this means for you and your business get in contact with your wealth manager, financial adviser or accountant.
* Special purpose vehicles – This is where a landlord changes the legal entity of their property portfolio, turning it into a business. The benefits of which are that they could potentially turn rental profits at higher or additional rate income tax bands (40% or 45%) to corporation tax at 19%. They can also take advantage of the dividends allowance (currently £5,000 but will reduce to £2,000 from the 2018/19 tax year) and account drawdown. However, there is much to consider here and certainly not something to be considered without careful planning and professional advice.
* EPC changes - From the 1st April 2018 there will be a requirement for any properties rented in the private rented sector to have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). There is a civil penalty of £4,000 for breaches.
* Electrical safety standards for properties let by private landlords – From September 2017 regulations have been put in place to ensure that electrical safety standards are met during any period when the premises are occupied under a tenancy. Electrical testing is to include the fixed wiring, electrical fixtures, fittings and appliances provided by the landlords. There are penalties for not adhering to these new regulations so if you are not sure what you should be doing contact your letting agent.
It is now more important than ever to seek professional advice, if you are unsure of any of the above points please contact your wealth manager, accountant and/ or letting agent.
Finally, congratulations to Jayne Spencer for winning the bottle of champagne! Here are some photos from the evening.