Landlord Issues Archives - National Residential
 

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Category Archives: Landlord Issues

NB. National Residential are pleased to announce our new Joint Venture funding opportunities for anyone planning to re-invest their capital in property development. Please see Joint Venture – Property Development Funding

 
Rightmove research indicates 24% of landlords in Oct 2019 are planning to sell at least one property from their current portfolio in response to the new regulations and tax changes made over the last few years that are making and/or have made being a landlord a more complicated and less attractive prospect.
 
Our CEO David Coughlin manages a significant property portfolio. It is in his personal and professional interest/responsibility to be expert in all existing and planned legislation, frequently experienced problems and he has first hand experience putting solutions into practice.
 
Below is a selection of the biggest issues facing landlords and how National Residential uses David’s expertise to help landlords to sell their investment properties for the best price and least disruption to their rental income while still liable for the costs in running an empty property.

 
If you plan to sell rental property, sell it with us. We are the experts. We have first hand experience solving 99% of all problems suffered by landlords. We are confident that no other company does as much as we do to help landlords sell their property faster, with fewer headaches, for the best price and minimum overheads.
 


 

Helping Landlords Solve Problems No Other Estate Agents Can Manage

Landlords face many problems, most relate to property and/or tenants however ongoing economic and legislative changes have added a lot more things for landlords to worry about. Shrinking returns, increased costs, more rules, more penalties and the prospect of fewer options to end tenancies have resulted in more and more landlords selling some or all of their rental properties.

New Rightmove research indicates 24% of landlords are planning to sell at least one property from their current portfolio, 13% will be selling more than one and 11% report they wish to sell their entire portfolio. This is despite rents being at record levels having increased by 2% in the last year.

We take a look at some of the common problems forcing landlords to sell and how we can help landlords wanting to sell up because of them.

landlords tax forcing landlords to sell up Continue reading Helping Landlords Solve Problems No Other Estate Agents Can Manage


House Prices After Brexit

 

What Will Happen To House Prices After Brexit?

A lot of people have speculated about what will happen to house prices after Brexit. The uncertainty has had a dire affect on the housing market with fewer buyers, fewer sellers and sales taking longer to complete. Despite the smaller volumes of trade and slowed growth rate, house prices have largely remained the same with only Scotland showing a small fall in house prices in the months immediately running up to the first withdrawl deadline in March 1, 2 so why is the market so affected by the uncertainty over Brexit?

 

Stark Warnings About House Prices After Brexit Have Excited Buyers

There have been stark warnings from the Bank of England’s governor Mark Carney that house prices could fall by up to 30% from their pre Brexit level if there is no deal. He also said that is his job to plan for the worst case scenario suggesting that the pessimism is based on possibility rather than probability. While most industry experts do predict some sort of drop in price following a no deal Brexit, although there are also those who predict no change and those who predict slight increases 3.

Gauged by the reduced activity in the housing market it seems as though a significant number of buyers are delaying their plans to buy property until after Brexit due to the fear of negative equity if the property values drop significantly.

The buyers most tempted by the prospect of a drop in property costs are those who are not also selling during the same period – i.e. first time buyers, second home owners and buy to let landlords. They represent a significant percentage of the housing market buyers.

 

Will House Prices Drop After Brexit?

The simple answer is that nobody can know until a plan has been agreed and even then the extent of any affect on house prices after Brexit will also depend on a range of other economic factors including Secton 24, aka The Landlord’s Tax.

The following information gathers together some relevant factors and attempts a logical understanding of the situation. It is NOT intended as any sort of advice.

 

Continue reading House Prices After Brexit


Section 24 – HMRC UK Tax Changes

 

NB. National Residential are pleased to announce our new Joint Venture funding opportunities for anyone planning to re-invest their capital in property development. Please see Joint Venture – Property Development Funding

 

Section 24 Means Buy To Let Landlords Can No Longer Offset 100% of Mortgage Interest Against Rental Income.

Section 24 - Her Majesty's Revenue & Customs logo Section 24 is a HMRC taxation change affecting what costs can be deducted from rental income to calculate ‘Net Profit’ – i.e. the figure counted as income and the figure that you will pay taxed against.

As tax relief drops, tax bills will rise and in some cases taxes owed will be more than the income minus costs.

Chris Cooper of Axe The Tenant Tax said,
A perfect storm is brewing in the rental market, landlords will either have to raise rents or sell because of the tax rises. Landlords are sleepwalking into disaster”.

section 24 tax payments prediction

The tax relief that private landlords of residential properties will be able to claim for finance costs is being restricted to the basic rate of Income Tax (20%) for the lowest amount between finance costs, property business profits or adjusted total income.

Until April 2017 mortgage interest was an allowable expense so ‘Net Profit’ represented rental income minus mortgage interest and any other allowable expense.

After 2021, Net Profit will be calculated on rental income minus allowable expenses but NOT including mortgage interest.

The changes are being phased in over a four year period with the amount of finance that can offset income being reduced from 100% to 0% in 25% steps.

 

2016 /17 – 100% TAX RELIEF

100% of 360,000 = £360,000

Taxable income, (450,000 – 360,000) = £90,000

Income Tax calculation:
£11,000*0% = £0
£32,000*20% = £6,400
£47,000*40% = £18,800

Total Income Tax = £25,200

2017/18 – 75% TAX RELIEF

75% of 360,000 = £270,000

Taxable income, (450,000 – 270,000) = £180,000

Income Tax calculation:
£11,000*0% = £0
£32,000*20% = £6,400
£137,000*40% = £54,800

Total Income Tax = £61,200

 

2018/19 – 50% TAX RELIEF

50% of 360,000 = £180,000

Taxable income, (450,000 – 180,000) = £270,000

Income Tax calculation:
£11,000*0% = £0
£32,000*20% = £6,400
£227,000*40% = £90,800

Total Income Tax = £97,200

2019/20 – 25% TAX RELIEF

25% of 360,000 = £90,000

Taxable income, (450,000 – 90,000) = £360,000

Income Tax calculation:
£11,000*0% = £0
£32,000*20% = £6,400
£317,000*40% = £126,800

Total Income Tax = £133,200

 

2021 onward – 20% TAX RELIEF

20% of 360,000 = £72,000

Taxable income, (450,000 – 72,000) = £378,000

Income Tax calculation:
£11,000*0% = £0
£32,000*20% = £6,400
£335,000*40% = £134,000

Total Income Tax = £140,400

 

 

 

NB. These calculations (together with the others on our case studies page) are intended as approximate illustrations only and may contain minor inaccuracies. We strongly recommend anyone concerned about the effect of Section 24 on their tax bills should discuss the implications with their accountant and get a detailed, tailored projection.

For the government guidance on working out the effect of Section 24 tax relief abolition, see How to assess the impact of Section 24 from 6 April 2017.

The most consistent advice given to landlords and property investors by the HRMC and advisory bodies is make sure you keep informed and are prepared for the effects of Section 24 so you can make informed decisions and plans ahead of tax payment deadlines.

National Residential consultants are experts in property investment as well as property sales. Contact us today on 01244 757152 to find out how we can help landlords and property investors to respond to Section 24 tax changes.

Continue reading Section 24 – HMRC UK Tax Changes


Case Studies of Section 24 Buy To Let Tax Changes

Buy To Let Section 24 Finance Expenses, Tax Changes

NB. All figures are intended as a guide only. The calculations have not been confirmed by the HMRC however they are based on the formula given on the HRMC guidance – please see HMRC Case Studies re Section 24 Tax Changes

Anyone considering selling their property based on these figures should seek confirmation from their accountants. National Residential cannot be held accountable for any inaccuracies in the information given.

All case studies are based on before 2017 (i.e. before the tax changes come in force) or after 2021 (i.e. after the gradual changes have been phased in).

The 4 phases are:

  1. 17/18: 75% of finance costs deductible from rental income, 25% basic rate tax reduction for finance costs.
  2. 18/19: 50% of finance costs deductible from rental income, 50% basic rate tax reduction for finance costs.
  3. 19/20: 25% of finance costs deductible from rental income, 75% basic rate tax reduction for finance costs.
  4. 20/21: 0% of finance costs deductible from rental income, 100% basic rate tax reduction for finance costs.

As summarised on Section 24 – HMRC UK Tax Changes, the biggest affect to tax bills will be to people whose income is taken into the higher tax brackets however people whose tax remains the same could find that they lose some benefits as the amount classed as income will change.

As a general rule of thumb, the bigger the finance costs are, the bigger the effect of Section 24.
Continue reading Case Studies of Section 24 Buy To Let Tax Changes


Selling Tenanted Property

NB. National Residential are pleased to announce our new Joint Venture funding opportunities for anyone planning to re-invest their capital in property development. Please see Property Development Funding

 
selling tenanted property

As we previously documented in Complications & Problems Selling Rental Property,  there are A LOT of decisions to be made and a lot of laws to be considered when landlords decide they want or need to sell their rental property and a lot of it depends on factors that are usually unknown at the start of the process – such as, whether the buyer you haven’t met yet is looking for a private residence or a rental property and whether they would prefer a sale with sitting tenants or vacant possession.

If landlords selling tenanted property choose to leave tenants in situ during the sale it could cause problems showing the property but if they vacate the property too soon, it could cost them thousands in lost rent.

The best option, of course, is to leave sitting tenants in situ as long as possible but not so long that it causes problems. Timing, speed and legal advice are all crucial to getting the best results for landlords selling tenanted property.

National Residential specialise in selling tenanted (& sub-tenanted) property, often with additional complications like short leaseholds or absentee freeholders.

Continue reading Selling Tenanted Property


Complications & Problems Selling Rental Property

Problems Selling a Rental Property With Tenants In Situ During The Sale

Selling a rental property with tenants in situ can be difficult in any circumstance because it can add cost (sometimes in the form of losses), risk and complication throughout the process to both the buyer and the seller.

For home owners selling property while tenants are in situ, the potential for problems range from showing interested parties around the property without infringing a helpful tenant’s legal right to ‘quiet enjoyment of the property’; to trying to arrange access to the property with ‘unhelpful‘ tenants; to ‘bad’ tenants putting buyers off through sabotage, unkempt surroundings and resentment; to collapsed sales through problems with mortgage conditions; to the compliance of any tenant to fulfil any state of occupancy at completion agreed between the buyer and seller.

In other words, some buyers might want the tenants to stay while other buyers want them to leave. They can refuse to do either. It’s a risky business.

bad-tenants

Added to all that, with the legal implication tenancy types have on eviction options and thereby sales options it’s easy to understand why more sales can fall through selling a property with a sitting tenant and why property with tenants in situ can be difficult to sell.

Continue reading Complications & Problems Selling Rental Property


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