I’ve been silent for a while. The main reason is that I’m really not sure which way to turn following recent government tax changes. Having digested lots of industry news via the excellent Property Tribes, Property 118, Landlord Law and The Property Hub (there are others but I only have so many hours in a day). Mulling over the articles, comments and interviews it appears that, as mortgaged landlords, we’re about to become rather royally screwed. So why are they not screwing the landlords who don’t have mortgages??
Of course, this isn’t a recent announcement and I’ve been looking at our position carefully, examining the options, looking at the bright side as well as for that silver lining that I understand all clouds have. The upshot is: the removal of the “wear and tear allowance” has increased our tax bill by £3000 this year. It will be increased again by a further £9,000 or more by 2020 (that’s £1000 a month!!) with the restriction on mortgage tax relief. It isn’t cost effective to become a limited company…. and the flat we’re about to buy is costing £3,000 more than if we bought it a year ago. On top of that, the town is being swamped with rooms which look something akin to boutique hotels (complete with matching cushions and artfully placed books on a desk) and new landlords are charging as much monthly rent as a 2 bed flat commands, whilst their designer folly grips the market. They will hit reality soon enough though when someone throws up on the pale grey carpet.
So, what’s changed in the last few months?
- As letting agents, our business is steady and growing. Landlords haven’t rushed to sell their portfolios and our business model isn’t reliant on tenant fees – so all good there.
- As landlords, we have record low turnover in the HMOs as our rooms are now cheap compared to the new ones coming onto the market. Ok, so the curtains don’t match the bedspreads, and the furniture was chosen for durability rather than style, but really, what IS it with beautifully designed rooms?!? I don’t get it. I must be turning into a dinosaur.
- We have now taken the decision to cease letting to any benefit tenants which is a great sadness to me. The last three evictions of state sponsored tenants have resulted in court costs, council interrogations and anti-social behaviour which caused misery to the remaining tenants. When I started, I had a link into the council, we worked together as we both had the same goal in mind – to house someone who needed it. I’m now met by a firewall of an email system, no named person to help get the claim underway and no way out if the tenant fails to behave or fails to pay.
- The flat we are about to buy is a no-brainer as we already hold the freehold and the maisonette above, and will then own the whole building. We were raising £100,000 using part mortgage and part further advance from another property, as we’re still recovering from January’s tax bill. Despite having excellent credit ratings, a healthy income, a portfolio in good health and having never missed a payment, we are being refused on the basis that the mortgage company believe we want to use the money to sustain our letting agency! This is incredulous, unless my husband is planning on buying a new, younger administrator and a Maserati in which to drive her around.
- On top of this purchase, we now need to pay 3% of the purchase price to the Government even though the flat isn’t in the Stamp Duty bracket.
Is it enough to throw in the towel? Almost, but not yet. Although I do have a plan B: from May 2017 the Government are opening up apprenticeships to ALL ages, not just 16-19 year olds so you may find me working my way up the corporate ladder with sickness benefits, a company car, paid annual leave, and a share option scheme, where I may just replace the extra £1,000 a month tax payment I need to pay by the time my pension kicks in. Only to discover the government have taken that too!