New Investment Property Legislation Could Lead to Fines for Landlords

UK landlords are being urged to brush up on their knowledge of new legislation in order to avoid being hit by fines.

Direct Line for Business is encouraging the 1.75 million landlords in Britain to ensure they are aware of the impact that legislation such as changes to Stamp Duty Land Tax (SDLT) and the removal of Wear and Tear allowance, tenants’ right to request energy efficiency improvements and mortgage tax relief.

It was found that the change that had the biggest financial impact over the past year was the Stamp Duty increase, adding a 3 per cent charge to all newly purchased buy to let investments. Based on the average UK house price of £219,544, any landlord expanding their portfolio will be required to pay Stamp Duty of £8,477. This is three and a half times the £1,891 that would previously have been paid.

Landlords in London and the South East have been hit the hardest by these changes. The Stamp Duty on investment properties in the capital has now reached £28,704, while Stamp Duty in the South East stands at £15,282.

Further to this, the changes to Mortgage Interest Tax Relief also have a negative financial impact on landlords. Direct Line for Business’s analysis of average salaries, rent and mortgage repayments across the UK found that landlords could be set to pay an extra £156 in tax in the 2017-18 tax year in comparison to the year before, with those in the South East set to be most negatively affected.

Finally, the Energy Efficiency (Private Rented Property) Regulations for England and Wales are set to come into effect from April 2018. They mean that landlords must ensure that properties they rent in England and Wales have an Energy Performance Certificate (EPC) rating of E before they can be let out. Failure to do so could lead to fins of up to £5,000 or 10 per cent of the rateable value of the property. However, updating the efficiency of a property can result in cost-savings of up to £1,000 per year.

However on a positive note, the analysis found that landlords expect to see a rise in rents of four per cent in 2017. On the average annual rental income of £10,740 this equates to an increase of £386.64 throughout the year.

Christina Dimitrov, Business Manager at Direct Line for Business said: ‘Being a landlord in the current climate can be a profitable business, especially if there is a demand for rental properties as we’ve seen in recent years.  However, with so many changes taking place, and with more on the horizon it’s essential for any landlord to be fully up-to-speed with legislation, as the penalties for breaking the law can erode any potential profits. We understand that one of the challenges for landlords is having the correct legal documents in place. To make it easier for landlords, Direct Line for Business offers a legal documents service to all policyholders, which can help with the creation of vital legal documentation needed when renting a property.’