Landlords – and prospective landlords – have had a tough time recently in respect of legislation changes. Below we’ve summarised the key changes you need to be aware of if you’re already a landlord or considering becoming one:
February 2016 – right to rent checks
This is an ongoing reform borne out of the government’s policy to tackle illegal immigration and deter individuals who do not have the right to stay in the UK from remaining here unlawfully. As part of this reform new legislation will come into force on 1 February 2016 which will impact landlords, anyone who sublets and anyone who takes in lodgers.
This is referred to by the government as the ‘right to rent checks’ and will apply to new tenancy agreements in the UK from 1 February 2016 onward, whether written or verbal. These checks must be undertaken within 28 days before the start of the new tenancy agreement, and the records should be kept. The aim of these checks is to ensure that the adult tenants have the right to rent these properties from an immigration perspective, namely, by verifying the perspective tenants’ right to stay in the UK.
Landlords, their appointed agents and those who sublet properties or take in lodgers may be liable for civil penalties of up to £3,000 per tenant, where those tenants are found not to have the right to rent properties in the UK due to their immigration status. To assist, the Government has provided an online checking tool which can be used by landlords and others to conduct the right to rent checks: https://www.gov.uk/landlord-immigration-check.
April 2016 – Stamp Duty Land Tax (SDLT) on new buy-to-let properties
As we have previously highlighted, this legislation will come into from 6 April 2016. The draft guidance states that an extra 3% stamp duty charge will apply to any purchaser(s) who owns more than one residential property at the end of the day of its purchase – irrespective of the intended use of the property.
April 2017 – removal of higher rate income tax relief on mortgage interest
Thousands of buy-to-let landlords will see their earnings hit after George Osborne cracked down on mortgage interest tax relief in the 2015 summer Budget.
The amount landlords can claim as relief will be set at the basic rate of tax – currently 20 per cent. Currently landlords can claim the tax relief at their highest rate of income tax, potentially up to 45%!
This change will be phased in over a four-year period from April 2017. Mortgage interest relief is estimated to cost £6.3billion a year, a Freedom for Information request revealed recently.
The Chancellor claims the move will ‘level the playing field for homebuyers and investors’. We anticipate the changes will only deter smaller investors in the buy-to-let market and put it into the hands of larger operators, which won’t necessarily be a good thing.