2017 was a rocky road for many in the landlord sector, with lots of legislative changes hitting the sector hard. With the continued impact of things like Mortgage Interest Tax Relief and the roll-out of Universal Credit, below are some important changes for all landlords to make sure they are aware of as well as steps to take in face of these changes in 2018.

Mortgage Interest Tax Relief

This came into effect in April 2017 so landlords should already be aware that mortgage interest tax relief is being steadily cut from now until 2020, when all financing costs can only attract the basic-rate tax deduction at 20%. During the 2017-18 tax year, landlords can still claim 75% of the finance costs at the higher rate, with the remaining 25% at the basic rate. From 2018-19 this will fall to 50% and in 2019-20, 75% will receive basic-rate tax reductions.   Come the 2020-21 tax year, all financing costs will be given the basic-rate tax reduction. This will affect the highest earning landlords the most and we advise all landlords to seek advice and get your accounts in order to make sure you’re property investments are still worthwhile. There are numerous ways to keep value in your investments such as setting up a limited company or realigning portfolios in order to have fewer mortgaged properties, which experts can advise on further.

No Deposit Insurance

There are now new deposit insurance schemes available on the market for tenants as an opportunity to secure rent on a property without having to come up with the 4-8 weeks rent many landlords require in advance. These typically ask for just a week’s rent, with an insurer providing back-up to any claims by the landlord at the end of a tenancy. Tenants remain liable for the damages and the insurer chases recovery from them. There has been some scepticism over these insurance schemes and, with the option to accept insurer-baked deposits or not, many will question how secure this leaves the landlord. As with deposit custodial schemes, these new developments are worth landlords keeping an eye on throughout this year.

Prudential Regulation Authority Changes

Since 30th September 2017, landlords with four or more mortgaged properties have had to meet new requirements set by the Prudential Regulation Authority (PRA). There is now a second phase of changes coming that targets loans to portfolio landlords to prevent higher risk buy-to-let lending, with lenders now reviewing a landlord’s entire property portfolio when deciding on any single property application. Those with large property portfolios looking to expand further will find these changes the most challenging and it’s advised to create a thorough business plan for your property investment activity, having all financial records planned out in advance of any new mortgage applications.

Universal Credit roll-out and changes

Universal Credit is being rolled out as a replacement for housing and other benefits including income and child support. At present Universal Credit is a challenge for landlords as its new and complex, and although changes made should improve the service, until the system has proved itself, landlords could remain cautious about renting to Universal Credit recipients for fear of rent arrears. In cases where tenants are in arrears of two months or more, landlords can request direct payment.

Minimum Energy Efficiency Standards

Landlords will be legally required come 1^st April 2018 to ensure any rented property has a minimum energy performance certificate rating of E. This is a large change, brought in by the Department for Energy and Climate Change, to improve energy efficiency across the country and cut carbon emissions. Landlords should review their property to check it has a valid and up-to-date Energy Performance Certificate (EPC) and if the property has an EPC rating below E, or is at risk of becoming so, steps should be taken to improve the energy efficiency of the property. Spells between tenants are a great time to make improvements.

As one of the West of Scotland’s longest-standing estate agents, we have had lots of experience managing the ups and downs of the housing market in recent times, so you can be confident you’ll be in safe hands when working with us. With an expert team by your side and a variety of properties on offer, including both property to let and homes for sale, at Caledonia Property we are confident that we can match you with the right home.