Jump to content
House Price Crash Forum
Sign in to follow this  

Right To Rent

Recommended Posts

From February 1, 2016, landlords who let property in England will have to carry out checks to make sure potential tenants have the right to rent property in the UK. This applies to any potential tenant, irrespective of nationality, and includes lodgers, house guests and family members who pay rent, as well as sublets. If you use a letting agent, they will take responsibility of this on your behalf if it's part of a written agreement. Anyone found to be letting a home to someone who is not allowed to stay can be fined up to £1,000 the first time and £3,000 subsequently.

From a rightmove survey.

From April 1st, 2016, anyone who buys additional residential properties is eligible to pay an extra 3% in stamp duty, with no minimum threshold. For example, this could be a holiday home or buy to let anywhere in the UK.

There will be no exemption for landlords with large portfolios as previously considered by the Government. Stamp duty will also be payable on the property even if a joint purchaser is a first time buyer. The good news is that stamp duty is a legitimate deductible expense against capital gains tax if you sell.

Assume your buy-to-let earns £20,000 a year and the interest-only mortgage costs £13,000 a year. Currently tax is due on the difference or profit. So you pay tax on £7,000 only, meaning £2,800 for HMRC and £4,200 for you.

In 2020, tax is now due on your full rental income of £20,000, less a tax credit equivalent to basic rate tax on the interest. So you pay 40% tax on £20,000 (i.e. £8,000), less the 20% credit on your mortgage payment (20% of £13,000 = £2,600), meaning £5,400 for HMRC and £1,600 for you. Your tax bill has therefore almost doubled. Whilst all higher rate tax payers will be affected by this, basing taxation on rental income could push some landlords on lower tax rates into a higher band.

In light of the recent Government changes to stamp duty and tax relief on second homes and increased legislative obligations on landlords, which of the following applies to you?

Is this going to the be the first time some LL have seen some of this info?

Edited by SarahBell

Share this post

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   295 members have voted

    1. 1. Which of the Prime Minister's options would you choose?

      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.