71% of accidental landlords unaware of new regulations

71% of accidental landlords unaware of new regulations

More than half (55%) of new buy-to-let mortgage applicants are unaware of the mortgage tax relief changes, with accidental landlords the least likely to be aware of these new regulations, according to landlord insurance provider Direct Line for Business.

Nearly two-thirds (6%) of applicants were unaware of either the changes to mortgage tax relief or MCD.  This lack of awareness rises to 71% amongst ‘accidental landlords’, namely those who rent out property due to unforeseen circumstances such as being unable to sell, or inheriting a home.

Mortgage advisers estimate that accidental landlords account for approximately one in six (17%) new mortgage applications, with overall buy-to-let mortgage applications growing by 29% in the past year.

The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy-to-let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as “consumer” lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests.  
 
Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic-rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy-to-let property will pay a 3% surcharge on their stamp duty bill.


Nick Breton, Head of Direct Line for Business, said:

“The new EU legislation on mortgages coupled with the Government’s increase in buy-to-let taxation could significantly alter the buy-to-let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord.

“With house prices in the UK rising by 7% in the year leading to October 20152, and with the estimated average deposit standing at more than £61,0003, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city.”

With the new legislation set to be phased in between 2017 and 2020, Direct Line for Business is providing landlords looking to protect their income with the following tips:

Get good insurance cover – as well as covering the building and its contents, landlord insurance can also cover the landlord’s liability and loss of rent following an insured event such as a fire or flood. The average rental cost is £739pcm4 so not having the right cover in place could have a significant impact on your finances, especially if the property is uninhabitable for a period of time while repairs are taking place.

Secure tenants for less – letting and management agents currently charge between 10 and 15 per cent of the monthly rent in fees. If you have time and are prepared to take on the responsibility of finding tenants, making sure you are following all the correct procedures and managing your properties yourself, you could save more than £1,000 per year. If you rent a property privately you can also claim back the cost of advertising, credit checking, referencing, deposit protection and professional inventory costs

Make the most of existing tax benefits – Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. You can also claim the whole cost of council tax or utility bills that a tenant would pay

Keep up to date with legislation – It is important to continually keep an eye on the policies affecting landlords to ensure that a property complies with the latest legislative changes. It is also important to consider whether a property is not just affordable in the short term but in the medium to longer term as often relief is phased out and additional taxes phased in over a number of years.

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Latest Comments

RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

It depends on the people, some older adults decide to make a long-distance move in order to live closer to their children or settle in a place with a lower cost of living.

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brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

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IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

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IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

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cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

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Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

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