5 FAQs for landlords in 2018/19

5th April 2018

Tighter tax and mortgage rules have drastically reduced investment in the buy-to-let sector over the last 2 years as recent changes take their toll. 

Combine those impacts with Brexit uncertainty and rising interest rates, and it’s no surprise to see a surge in the number of landlords intending to reduce their portfolio in 2018.

According to the National Landlords' Association, those numbers hit a 10-year high in January 2018 and with more changes to come in 2018/19 it seems the storm is far from over. 

Hot on the heels of our previous post on duties on maintenance and repairs, this blog will try to address 5 of the most burning questions for landlords. 

What’s changing with mortgage interest relief?

Before April 2017, landlords could deduct their mortgage interest costs from their rental income as part of their tax return. 

Thereafter, the change affected mortgage interest, interest on loans to buy furnishing and fees incurred when taking out or repaying mortgages as profits were squeezed. 

From 6 April 2018, landlords will only be able to deduct 50% of their costs from their profits (down from 75% in 2017/18) with the rest available as a deduction from the basic rate of income tax. 

What about the clamp down  on rogue landlords? 

Local authorities are turning the screw on landlords following the introduction of new government legislation this month, and tenants may soon be able to do the same. 

Councils can fine landlords up to £30,000 or issue them with banning orders if they are found to be renting unsafe or substandard accommodation. 

In addition, Bristol City Council is consulting on a proposal to make landlords who rent shared houses in 12 wards around the city apply for an additional licence.

Those council wards are Ashley, Bishopston & Ashley Down, city centre, Clifton, Clifton Down, Cotham, Easton, Hotwells & Harbourside, Lawrence Hill, Southville, Redland, and Windmill Hill.

If approved, landlords with shared houses in these wards will pay for an extra licence which will theoretically cover the costs of council inspection teams conducting mandatory checks.

There’s also the looming threat of the Private Members’ Bill, which aims to give tenants the power to claim landlords are in breach of contract if the property is unfit for habitation. 

Are rising interest rates good or bad?

Interest rates increased for the first time in 10 years in November 2017, as the Bank of England lifted the rate from 0.25% to 0.5%. This rate remains in April 2018. 

While this was a minor boost for savers, it’s a small blow for anyone seeking to take out a mortgage – and there’s the very realistic prospect of further interest rate hikes later this year. 

How will falling inflation affect my business?

Usually when interest rates rise, inflation tends to decrease and this was the case in February 2018 when the inflation rate dipped to 2.7%. 

The Bank of England expects the rate of inflation to slump back to 2% by the end of 2018, which suggests the economy is slowing down. 

People tend to be more cautious with their money in times of falling inflation, and that could result in 2018 being a bad time to reduce your property portfolio so keep an eye on market conditions. 

Should I be doing anything to prepare for Brexit?

The truth is nobody knows what life will be like after the UK leaves the EU, and that’s what breeds uncertainty. 

What we do know is the nation’s housing needs are no less acute and landlords will continue to play a prominent role in supplying habitable accommodation. 

How can we help?

If you would like to discuss how these changes may affect you, talk to us on 0117 973 3377 or email enquiries@hollingdalepooley.co.uk