Following George Osborne’s announcement in 2015 of the buy to-let tax relief changes, what once seemed like years away is now right around the corner. Britain’s landlords are now faced with serious changes in tax implications commencing from April 2017, potentially forcing many into a significantly higher income tax bracket.
Up until now, landlords have been able to offset their mortgage interest against income tax. And rightly so, so we thought. In a nutshell, landlords were only required to pay tax based on the profit they accumulated from rental income once mortgage payments had been made. However, landlords are now required to pay tax on their entire rental revenue between 2017-2020, facing a 20% tax credit, resulting in many landlords being forced to sell up and say goodbye to the buy to let property market.
Every mortgaged landlord currently paying between 40-45% tax will end up paying much more, including basic-rate taxpayers too. Ultimately, those impacted by the change in tax will be pushed into a higher-rate tax bracket. However, both limited companies and the small percentage of landlords without mortgages will remain unstirred.
Those who are worst affected will see:
Our advice specialises in finding the best possible direction to head down for all situations faced in the current but constantly evolving property market. A potential and quite sought after solution to this drastic change is for landlords to now switch their property to a HMO, where they are then able to increase their rental income, ultimately leaving them with more profit after tax.
For more help, information and advice to prepare you for the upcoming months, feel free to contact us!
When looking to rent your property, you will find that there are a range of options available to you when it comes to finding the best suited tenants. If you are looking to let your property to a group of different tenants that are not members of the same family, a HMO licence may be the option for you.
HMO stands for house in multiple occupation and will apply to your home if at least three tenants live there at one time and if toilet, bathroom or kitchen facilities are shared amongst tenants. Larger HMO’s apply if your home is at least three storeys high, with a minimum of five tenants living there sharing toilet, bathroom or kitchen facilities. HMO’s are for homes being shared by more than one household.
A common example of a HMO property would be one in which students rent for their accommodation during university term time. Properties that let to students must obtain a HMO licence in order to do so, as each individual student is classified as one household.
To establish whether your property is considered a HMO, you will need to find out whether there will be more than one household living there. A household is considered to be either a single person or members of the same family who live together. This can include:
Therefore, if there are a group of people living in one property however have no family link, they are each considered as a household and will not be able to rent together in a property that does not have a HMO licence.
If you need a HMO licence, you must contact the council to request one. You can either apply for the licence yourself or if using a managing agent, they are also able to apply for one for you.
You’ll be charged a fee which is set by the council. A separate licence is required for each HMO you run, and is valid for a maximum of five years. It is your responsibility to renew your licence before it runs out as you can be charged an unlimited fine for renting out an unlicensed HMO.
The council has to carry out a Housing Health and Safety Rating System (HHSRS) risk assessment on your HMO within 5 years of receiving a licence application. If the inspector finds any risks during the assessment, you must carry out work to eliminate them before your application can proceed.
Any changes that happen to either your property or your tenants must be reported to the council. You must tell the council if:
For any further information or advice, please feel free to contact us!
The general idea and overall process of moving home can be somewhat daunting and most probably up there with one of the biggest, most life-changing decisions you’ll ever have to make. However, the many obstacles you will face along the way could result in either costing or saving you thousands of pounds, therefore we have put together a step by step guide of what to expect during the process of changing your humble abode and how to come to your final decision of whether you should either sell up or rent out your property.
This might sound silly, but it’s no trick question. The question you need to ask yourself is, are you entirely sure that selling your home is really what you want (or need) to do when moving home? If you’re looking to move due to lack of space, have you considered converting the attic or perhaps building an extension first? Although it may seem like the next step to take, sometimes selling your home may not always be the route to take. Whether it be your lack of income or if the market value of your property falls below the outstanding amount of a mortgage secured on it resulting in negative equity, selling your home may not always be possible. When selling up your home seems virtually impossible, letting out your home can be an effective alternative. Have you examined the advantages that come with renting your home out rather than deciding to sell? In a nutshell, have you considered all of your options before making your final decision?
There are a variety of questions you may initially have once you have decided that you will be renting out your property, particularly if it’s your first time. Researching into the letting market yourself may give you broader knowledge and better preparation on what you’re about to head into. Looking into the types of properties being let in your area and the monthly income they generate will also give you a more accurate idea on the range of prices you should be looking at in terms of your own. Here at Oscar and Hunt, we are able to help you explore the variety of options that may be available to you.
When renting out your home, it is vital that the mortgage lender is made aware. If you do not have a mortgage broker, you must directly contact your mortgage lender to let them know that you’re planning to let your home. Before you are able to proceed further, you will usually have to obtain something called a consent to let from your lender. If they refuse for any reason, you will need to switch the mortgage over to a buy to let mortgage. For more information and advice on mortgages, please contact London Finance Solutions on 020 8427 5057.
When making your property available for rent, you will firstly need to decide whether your house will be let either furnished or unfurnished. Ensure that you have removed anything from the property that is either fragile or valuable, to avoid any unnecessary accidents whilst your home is being let. It is important that any repairs on fixtures and fittings have been carried out prior to any tenants moving in and that all electrical appliances are in good, working order before anyone moves in.
Although it is not compulsory, using a lettings agent whilst renting out your property will cut out a huge amount of stress and labour from your end. At Oscar and Hunt, we take it upon ourselves to advertise your property for you, find prospective tenants and book in viewings to show them around their new potential home, draw up tenancy agreements and also deal directly with any enquiries and problems from the tenant. We usually charge around 10-15% of the monthly rental income you receive whilst also providing you with a guaranteed rental income, which is a small proportion for the valuable and potentially highly beneficial service you will receive.
Finding the right tenants for your property is important in making sure the overall timescale of the tenancy runs as smoothly as possible. You are able to meet potential tenants before any decisions are finalised, or you may prefer to leave it to us. At Oscar and Hunt, we use a systematic procedure to ensure that tenants are matched perfectly to specific properties, whilst also performing reference and credit checks on potential tenants to ensure we find the right ones for you.
Rent guarantee acts as a form insurance for landlords where, for a small annual fee, protects against loss of rent. In most cases, ‘Landlord Rent Guarantee Insurance‘ is combined with ‘Legal Assistance Insurance‘ whereby a landlord’s legal costs of recovering rent and/or evicting a non-paying tenant are covered.
Throughout these next few cold, gloomy winter months, it’s easy to knock up the bills around the house. All of a sudden, you’ll see an increase in gas, electricity and particularly those heating bills, and why not? We understand that anything is better than having to sit in the shivering cold, especially when you’re inside the comfort of your own home. However, becoming more energy-efficient in your home can save you bundles of pennies which you’ll most definitely be able to put to better use, especially with Christmas and New Years just around the corner!
Here at Oscar and Hunt, we have put together our top five tips on how you can be energy efficient this winter!
This might seem silly, but taking the time out to go through and understand your energy bill will go a long way in helping you save money in the long run. The huge amounts of information tends to be slightly daunting and difficult to understand, but rather than accepting the amount you use each month and paying your bills silently, why not read through and get to grips with what it is that may be costing you the most money each year and how you can go about cutting this right down?
Although it may seem obvious to have your home insulated, many people do not realise to what extent insulating your home and loft can save you in terms of money. On average, people can save up to £140 a year off their energy bills with decent loft insulation and £160 a year on cavity wall insulation. You do the maths!
Although it’s easy to flick the central heating on all day during this much colder period, stay as efficient as possible by planning and timing your heating in advance. Setting your heating to go on and off exactly when you need it to rather than running the risk of leaving it on all day (and night!) will work wonders for your bill at the end of each month.
It is somewhat inevitable that your bills will be slightly higher at this time of year, so pay more attention to switching off or unplugging any appliances that do not need to be on around the house. Whether it be the TV being left on standby, your phone chargers left plugged in or lights left on unnecessarily, getting into the habit of switching things off will make a significant difference to the amount of energy used in your home.
You’d be surprised how much energy is used in this one little room of your home, however by using your kitchen appliances more carefully, you can save up to £50 if not more, per year. Avoid leaving your taps running whilst washing up, only fill the kettle with the amount of water you need and cutting back on the amount of cycles per week using your washing machine can all reduce your overall energy bills each month and year.