The lettings industry is forever changing and this year is no exception. If you are a landlord or hoping to become one soon, we highly recommend reviewing these four upcoming changes which could not only affect your compliance with the law but also the profitability of your portfolio.
1: Mortgage Interest Tax Relief
As many of you will be aware, from April 2017, the Government began phasing out the tax relief you can claim on your mortgage repayments. The change will take full effect in 2020, when you will no longer be able to claim tax relief on your mortgage repayments. This year, you can claim up to 75% tax relief on your mortgage repayments. If you haven’t done so already, we strongly recommend talking to a financial advisor about the impact these changes may have on your portfolio.
2: Minimum energy efficiency standards
As of the 1st April 2018, all let properties must have a minimum ‘E’ rating on their energy efficiency certificate. Although there are a few exceptions to the rule, generally, any property which scores below an ‘E’ cannot legally be let to new tenants or, re-let to the existing tenants. With only a few months to go before these changes take effect, we strongly recommend reviewing your property’s rating and making any necessary steps for improvement.
3: Changes to mortgage applications for landlords
The Prudential Regulation Authority (PRA) has introduced new lending criteria for buy-to-let landlords meaning securing a mortgage on a new property or, remortgaging may require some expert mortgage advice to find the right product. The changes mean that lenders will take into account all properties in your portfolio not just the one the mortgage relates to in a bid to reduce lending to high-risk landlords. To better increase your chances of a successful mortgage application and, to ensure your let remains profitable, we recommend working with an expert to create a business plan and keeping detailed financial records for all properties you own.
4: Universal credit
In the Autumn Budget, the Government announced that while transferring to Universal Credit, new housing benefits claimants will be able to receive the benefit for an additional two weeks. The change aims to ease the conditions for both you, the landlord and your tenants and reduce the risk of rent arrears, although many remain nervous about the impact of this change. If you are concerned about how this change will impact you, we advise requesting that payments go direct to either your letting agent or yourself from the local authority.
With so much legislation for landlords to adhere to and punishments for non-compliance increasing in severity, the cost of working with a knowledgeable, ARLA regulated letting agent far outweighs the fines and penalties for failure to comply” summarises Michael Cook, Managing Director, Letting at Romans.