With numerous changes taking place in the buy-to-let market, we expand on the 4 things every landlord - whether existing or prospective – really needs to know.
Buy-to-let is constantly, evolving with times (some say). These changes are designed to cool the market, and they're certainly shaking things up. So, whether you're a landlord or are considering investing in buy-to-let property in the near future, here are five things you need to know:
1. Check your tenant has the Right to Rent
Under the controversial new Right to Rent policy, which came into effect at the beginning of February. Landlords now have to check whether their tenants have the legal right to live in the UK. If you can't prove you've made the checks and are found to be letting to a tenant who is living in the UK illegally, you could face a fine of up to £3,000. However, if you use a letting agent to manage your property, there's a good chance these checks will be already included in your contract.
2. Get ready for the stamp duty changes on 1st April 2016
Anyone buying a property as a second home or buy-to-let investment, will face a significant stamp duty hike, with a 3% surcharge being added to each band.
The changes could add a significant amount to your bill.
Here’s a quick example; If you buy (complete on purchase) on a £200,000 property from April onwards, your stamp duty bill will be £7,500, an increase of £6,000 on the current charge of £1,500.
Drinks on are George Osborne then…
3. Protect your tenant's deposit
You are legally required to protect your tenant's deposit using one of the registered tenancy deposit schemes. It's free, and must be done within 30 days of receiving the deposit. If there's a dispute at the end of the tenancy, the scheme operator will act as an arbitrator to decide whether some or all of the deposit should be returned to the tenant.
4. 4. Work out how landlord tax relief changes will affect you
Landlords can currently deduct mortgage interest costs from their property income before calculating their tax bill. However, from 2017, the amount of tax relief allowed will be gradually reduced until 2020, when costs will only be deductible at the basic rate. This will leave higher-rate taxpayers worse off. From April this year, the rules on 'wear and tear allowance' are changing as well. Under the current rules, landlords with furnished properties can deduct 10% of the annual rent from their profits before paying tax on them, regardless of whether they've spent any money on furnishings. Under the new rules, landlords will only be able to deduct actual expenditure on furnishings.