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At our property seminars in London, we often get asked about tax. For new landlords, tax laws can be a bit of a minefield (though thankfully, they’re straightforward once you get used to them). Tax rules are often subject to change, so it’s important to stay aware of key government decisions, and to understand how they’ll affect your UK property investments.
With that in mind, here’s a run-through of the most recent major changes.
Tax Changes and How They’ll Affect Your UK Property Investment
- Minimum energy efficiency standards. From next year, you’ll need to make sure your buy-to-let property meets the new minimum energy efficiency standards. That means that the house must have a rating of E or above. If it doesn’t, you could be fined £4,000.
- Mortgage tax relief changes. If you’re a higher tax payer, you won’t be able to deduct your all your mortgage interest costs from your rental income anymore. You’ll only be able to take away about 50%. If you’re concerned about how this might affect you, it’s worthwhile talking to a financial advisor.
- No more wear and tear allowance. Historically, landlords were able to use a 10% wear and tear allowance to reduce their tax bills – but this is no longer the case. Now, you’ll only be allowed to claim for actual costs involved in replacing furniture etc. in your property, and you’ll need to provide proof (if required) of how much you spent.
- Bigger bedrooms. Due to dubious landlord practices in the past, the HMO regulations have been amended, and bedrooms must now be a minimum of 6.52m2 for one occupant. If you’re found to have breached this ruling, you could be fined up to £30,000; so when searching for buy-to-let properties for sale, it’s worthwhile ensuring that all rooms are the correct size.
- Changes to Right to Rent. The Right to Rent law has been in place for a while now, requiring all landlords to perform certain checks on their tenants. However, be warned – the government have now introduced a new penalty for landlords who fail to carry out these checks, which can be as severe as five years’ imprisonment. You’re also likely to be fined too.
- Changes to the eviction process. There have been a few changes to the official eviction process. For example, you’re now unable to serve notice to a tenant during the first four months of their tenancy (if it’s a fixed term contract). Make sure you’re familiar with these laws – it’s unlikely that you’ll ever need to evict a tenant, but it’s important to know what you’re legally permitted to do if you find yourself in that situation.
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If you’re looking for buy-to-let property for sale, but you’re worried about what’s involved with becoming a landlord, feel free to attend one of our useful property seminars in London. They’re designed to give you all the information you need to get started in UK property investment, plus support and empower your future investment decisions.
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