2019/20 marks the start of a wide range of changes for the buy to let space, which could negatively affect those without planning, and benefit those who have sought independent advice. Some of these changes are:
Mortgage relief at 20% increased to 75% of interest.
This is the last year before all mortgage interest has a 20% tax relief, rather than at income tax rate. For those higher rate taxpayers who have not made any changes to their structure and have all of their properties in the personal name this will result in a significant loss of income. For those who have sought prudent financial advice, or who are lower rate tax payers this loss of income can be mitigated or avoided entirely.
Tax free personal income rises to £12,500
The 2019/20 budget has increased the income tax bands that individuals are liable to. This means earnings up to £12,500 are tax free, and 20% is payable furthermore the higher rate tax bracket has moved to £50,000 allowing some flexibility for landlords that were just above the previous lower rate tax limit.
Capital gains is now tax free up to £12,000
Those who are looking to sell property this year are able to earn a little bit more as the personal tax free capital gains allowance increasing from £11,700 to £12,000. For a jointly owned property this means a tax free allowance of up to £24,000 per annum on the capital gain of a sale.
Capital gains tax rules could change
Recently in the autumn 2018 budget Philip Hammond proposed that there may be adaptations to the capital gains allowance currently afforded to individuals who lived in their property before renting it out. The current rules state that you can let your property for 18 months after moving out before paying capital gains tax on a sale, but the proposed changes would reduce this to 9 months, and lettings relief would only apply to landlords who live with their tenants. The changes are still under consultation and if approved will not take effect until April 2020.
Lettings Fee Bans
Due to recent legislative changes from June there will be no fees charged to tenants in relations to lettings. For most this won’t cause any changes but those who have invested in properties with very tight margins may expect potential charges made to the landlord to effect income.
Changes to deposit protection and rental income
Landlords are being urged to check that the lettings agents are keeping money in government approved protection schemes. This is as all agents are required by law to ensure that income from rent and tenants deposits is fully covered. This comes into effect on April 1st.
HMO licensing changes
After the October 2018 changes to HMO licencing reclassifying a large number of landlords as Home of Multiple Occupant owners only a tiny fraction have sought out the proper licencing. Landlords need to check with their local councils on their policy if they own any property that is rented to 5 or more people, and be prepared to pay licencing fees for each property, otherwise face high legal costs.