The lettings industry is forever changing, and this year is no different. If you’re a landlord or are hoping to become one soon, we have the four big changes that you need to start preparing for this year.
These upcoming changes could not only affect your compliance with the law, but also the profitability of your portfolio, so be aware:
- Mortgage interest tax relief
As many of you will hopefully know, from April 2017, the Government began phasing out the tax relief that landlords can claim on their finance costs. The change will take full effect from 2020, when you will no longer be able to claim the higher rate of tax relief on your finance costs.
This year, you can claim up to 75% tax relief on your finance costs. If you haven’t done so already, it’s recommended that you talk to a financial advisor about the impact these changes may have on your portfolio.
As of 1st April 2018, all private rental properties must have an Energy Performance Certificate (EPC) rating of E or above. Although there are a few exceptions to the rule, generally, any property that has an F or G rating cannot legally be let to new or even existing tenants.
With only a couple of months to go before this change comes into force, we suggest reviewing your properties’ EPC ratings and making any necessary improvements.
- Mortgage applications
The Prudential Regulation Authority (PRA) has introduced new lending criteria for buy-to-let landlords, meaning that securing a mortgage on a new property or remortgaging an existing investment may require some expert advice to find the right product.
The changes mean that lenders will take all properties in your portfolio into account, not just the one that the mortgage is for, in a bid to reduce lending to high-risk landlords. To better increase your chances of a successful mortgage application, and to ensure that your let remains profitable, it’s recommended that you work with an expert to create a business plan and keep detailed financial records for all of the properties that you own.
- Universal Credit
In the Autumn Budget last year, the Government announced that, while transferring onto Universal Credit, housing benefit claimants will be able to receive payments for an additional two week. This change aims to ease the conditions for you 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 will affect you, speak with your tenants about having payments made direct to you from the local authority.
Michael Cook, the Managing Director of Lettings at Romans estate agent, comments: “With so much legislation for landlords to adhere to and punishments for non-compliance increasing in severity, the cost of working with a knowledgeable, regulated letting agent far outweighs the fines and penalties for failure to comply.”