Buy-to-let legislation - what's changed so far in 2018?

Wed 22 Aug 2018

The lettings industry is forever changing, and this year has been no exception so far. If you are already a landlord, or you’re considering becoming one, we recommend reviewing these four recent changes which could not only affect your compliance with the law, but also the profitability of your portfolio.

1.       Mortgage Interest Tax Relief

As many of your will be aware, from April 2017, the Government began phasing out the tax relief you can claim on your mortgage repayments. The change will take full effect in 2020, when you will no longer be able to claim tax relief on your mortgage repayments. This year, you can claim up to 75% tax relief on your mortgage repayments. If you haven’t done so already, we strongly recommend talking to a financial advisor about the impact these changes may have on your portfolio.

2.       Minimum energy efficiency standards

As of 1st April 2018, all rental properties must have a minimum rating of ‘E’ on their energy efficiency certificate. Although there are a few exceptions to the rule, generally, any property which scores below an ‘E’ cannot legally be let to new tenants, or re-let to the existing tenants.

3.       Changes to mortgage applications for landlords

The Prudential Regulations Authority (PRA) has introduced new lending criteria for buy-to-let landlords meaning securing a mortgage on a new property or, re-mortgaging may require some expert mortgage advice to find the right product. The changes mean that lenders will take into account all properties in your portfolio – not just the one the mortgage relates to in a big to reduce lending to high-risk landlords. To better increase your chances of a successful mortgage application and, to ensure your let remains profitable, we recommend working with an expert to create a business plan and to keep detailed financial records for all properties you own.

4.       Universal credit

In last year’s Autumn Budget, the Government announced that while transferring to Universal Credit, new housing benefits claimants will be able to receive the benefit for an additional two weeks. The change aims to ease the conditions for both you and your tenants, and to reduce the risk of rental arrears, although many remain nervous about the impact of this change. If you are concerned about his this change will impact you and your properties, we advise requesting that payments go directly to either your letting agent or yourself from the local authority.

Leaders’ Managing Director of Lettings South, Allison Thompson, commented, “With so much legislation for landlords to adhere to and repercussions for non-compliance increasing in severity, the cost of working with a knowledgeable, ARLA regulated letting agent far outweighs the fines and penalties for failure to comply. We highly recommend that, if you have not already done so, you meet with and appoint financial advisors and property managers to help you keep on top of these ever-changing regulations.”

To find out more about the different service levels we offer our landlords, contact your local Leaders branch.