You have to let us know if you're letting your property
Already renting out your home or thinking about it? If you are renting out your home or are thinking about doing so you need to apply for our Consent to Let. You must not proceed with letting out your property without first obtaining the Society's written consent. In order for the Society to provide Consent to Let, you would need to complete an application form which would ensure you had agreed to the following conditions of letting:
A Tenancy Agreement being in place – you must ensure that only an Assured Shorthold Tenancy is created (England & Wales) or a Private Residential Tenancy (Scotland).
Relevant Statutory Notice(s) (where required) being served on the tenants.
The Government has made some changes to taxation affecting landlords
Whether you are an existing or first time landlord you need to be aware of a number of recent tax changes impacting landlords. You should consider seeking expert advice from a tax expert or accountant.
The following information is provided purely as a guide and is not to be taken as financial or tax advice.
Many landlords will be aware of the uplift in Stamp Duty Land Tax on buy-to-let and second homes, but fewer may be ready for the changes to tax relief that were introduced in April 2017. While landlords won’t see the impact until they get their tax bill in 2019, it would be prudent not to be complacent, and landlords should assess their portfolio as soon as possible in order to keep their investments sustainable.
What are the changes?
Stamp Duty Land Tax (SDLT)
The government announced that from April 2016 higher rates of stamp duty land tax would apply to second property purchases. Landlords looking to purchase an additional property, where they already own either a residential property or a buy-to-let property, are now liable to higher rates of SDLT.
The table below details the rates currently applicable:
Existing residential SDLT rates
New additional property SDLT rates
£0* - £125k
£125k - £250k
£250k - £925k
£925k - £1.5m
Taxation changes to treatment of mortgage interest and finance costs
Previously landlords could deduct both mortgage interest and other allowable costs associated with a let property from their rental income before calculating how much tax is due. However, from April 2017 this changed and Landlords are now only able to claim tax relief at the basic rate of tax (20%). So higher rate tax payers will see a significant reduction in profitability from a let property. Basic rate tax payers are unaffected.
Furthermore, tax relief will be given as a reduction in tax liability rather than a reduction to taxable income. The changes are being phased in at the rate of 25% per annum, so it will be the tax year 2020/21 before the new tax rules are fully integrated.
This means that with effect from April 2017 the following applies:
Percentage of finance costs deductible from rental income
Percentage of basic rate tax reduction
For instance, a landlord who previously paid tax at 40% with a rental income of £15,000 and £10,000 of mortgage interest will pay £2,500 in tax in the year 2017/2018 compared to £2,000 in the previous year.
This means the landlord will see a £500 reduction in net profit year-on-year, and a £2,000 reduction in net profit overall from the 2017/2018 to 2020/2021 tax years.
Energy Efficiency Rating Requirements
From the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to have a minimum energy performance rating of E on an Energy Performance Certificate (EPC).
The regulations will come into force for any new let and when tenancies are renewed with effect from 1st April 2018 and for all existing tenancies on 1st April 2020.
It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless an exemption as set out in the regulations applies.