The Election result and Buy to Let
The UK property market is likely to resume ‘business as usual’ now that the uncertainty over the General Election result has been removed. Buyers and sellers who were waiting to see the policies that would result from the expected minority or coalition government can now act in the knowledge that a clear majority will give the Conservative government the freedom to introduce many if not all of the ideas in their manifesto, such as extending Help to Buy and Right to Buy and the Starter Home scheme.
With lenders also sitting on the sidelines to some extent in March and April, renewed competition between them will combine with rising house prices and increased regulation to mean that residential purchasers, remortgagers and buy to let investors will be in more need of advice than ever; in particular rising house prices may make it hard for some first time buyers to deal with lenders’ affordability criteria without expert guidance.
In this blog, however, we focus on the effect the new Government is likely to have on the Buy to Let market in the UK.
No new buy to let regulation
The Labour party proposed changes such as rent controls and a national landlord register in their manifesto. But the Conservatives have stated that they do not wish to regulate the UK private rental sector, meaning less bureaucracy and administration for landlords.
The changes proposed to Section 21 of the Housing Act, likely to come into force later this year, will make it easier to evict a tenant, although there still will be important restrictions on how you should serve an eviction notice.
Taxation of Buy to Let rental income
The Conservatives have said that they will raise the personal tax allowance from £10,500 to £12,500 in the next few years; if you are a pensioner relying on buy to let income alone, this means less of your rental income will be taken in tax. However, there have been discussions about whether the Government should tax rental income separately to normal income, so you should take expert advice on this before investing in buy to let property.
Banning sub-letting clauses in tenancy agreements
A section in the first 2015 Budget (there will be another one shortly) proposes a change that could cause a problem for some landlords. The Government says it will ‘make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting…’
This may make it easier for tenants to let out the property or rent rooms to other tenants, breaking the buy to let mortgage terms and conditions and it may invalidate any landlord insurance you have. Independent expert advice is vital in this area.
Whenever these policies come into force, there are important actions landlords can take right now to protect their investment and improve profitability and the most important step is to review their buy to let mortgage. It is absolutely essential that landlords regularly review their mortgage deal.
Interest rates have never been lower, and this applies to BTL as well as residential mortgages. If you haven’t reviewed your buy to let mortgage recently, now is the time.