During recent weeks, the Government has proposed a number of changes to legislation, each of which is expected to have a significant impact on landlords in the Private Rented Sector .
The lettings industry is coming under ever greater scrutiny. This added attention is generating a wide range of viewpoints from many commentators, and in many cases, dividing opinion. In this post, we explain each proposal in turn, and discuss the implications each would have.
Tougher Punishments for Rogue Landlords
The Department for Communities and Local Government (DCLG), recently invited input from the PRS on new proposals that will make it harder for rogue landlords to operate.
It must be stressed that, whilst rogue landlords make up a very small percentage, they have a large effect on public opinion, and damage the reputation of good landlords everywhere.
The DCLG ’s recent discussion paper was clear - they want to do more to drive rogue landlords out of the industry - and it included a variety of ways that may help achieve this, such as fines for offenders and the possible introduction of a blacklist and bans for repeat offenders.
It also explored the use of rent repayment orders, civil penalties and other ways to weed out the rogues, including fit and proper person tests. While these tests already exist, the document proposes making them stricter and less open to interpretation.
We’re really pleased to see the DCLG reaching out to gain the views, insight and experiences of landlords and agents. It’s clear from the discussions and feedback we’ve had, that many of you welcome these steps, providing they don’t result in more red tape. We look forward to seeing the outcome of the consultation later this year.
We also recently surveyed landlords registered with us asking for their opinions on the government consultation, and we’re currently analysing the results. We’ll share our findings with you soon.
Big Changes to Tax Relief
In his recent budget, the Chancellor announced a shake-up of the tax relief rules landlords can currently take advantage of. The capping of buy-to-let mortgage tax relief to the basic 20% tax rate has divided opinion, with many people suggesting it will price landlords out of the market and ultimately drive rents up.
Others, however, have suggested that it levels the field of landlord taxation with homeowners who can’t claim tax relief on their mortgage repayments, making it fairer for everybody.
Then there are some who claim that landlords should treat the renting of their property as a business rather than simply as an investment, and should, therefore, be taxed accordingly.
Much of the discussion rests on whether landlords view buying a property to let as a way to get more money coming in every month, or whether they see it as a long-term investment, relying on the house to increase in value over time.
Wear and Tear - Consultation
Another area where tax relief changes have been proposed is for wear and tear of furniture and fittings.
Currently, landlords can claim a wear and tear allowance of 10% of rent received, regardless of the level of costs incurred. This means some landlords gain relief where no expenditure has been made, whilst others spending above the 10% level are limited on the relief they can claim. It’s also restricted to fully furnished properties only.
The new proposals will allow all residential landlords (with the exception of those providing furnished holiday lets) to claim a deduction for the cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use.
It is important to note that this tax relief is strictly for the replacement of existing furniture and fittings and not for furnishing a property in the first place.
If you’d like to make sure your voice is heard, HMRC are currently running a consultation on the proposals until 9th October 2015. You can view the consultation here.
Right to Rent to go Nationwide
Another recent announcement is the plan to roll out nationally the responsibility for landlords and letting agents to perform ‘right-to-rent’ checks, to ensure the tenant has a right to be in the country. The idea has been trialled in the West Midlands, and whilst the full results have yet to be released, the Government have decided that they will press ahead with expanding the scheme to the rest of the UK.
It’s certainly an intriguing time for the Private Rented Sector and we expect more changes to be proposed. There’s still much discussion and debate to be had about all of these topics, and we expect there to be further changes to the proposals. We’ll be following them closely to see how they develop.