things brokers need to know in 2019 5

Mortgage interest tax relief In the 2019/2020 tax year, landlords will only be able to offset 25% of their mortgage interest for tax purposes and should therefore start planning accordingly. In the 2020/2021 tax year, all of a landlord’s gross rental income will be taxable and landlords will instead be given a reduction in their tax liability equivalent to 20% of their mortgage interest. This has led to a rise in the number of landlords considering transferring their portfolios to, or purchasing new properties through, a limited company structure. Incorporating as a limited company should be carefully considered. Brokers must ensure customers consult a qualified tax accountant and seek independent legal advice. 1 Houses in Multiple Occupation (HMO) Brokers should ensure that existing HMO landlords and customers thinking of investing in HMOs are aware of new legislation. Properties in England are classified as HMOs when occupied by three or more people forming more than one household. A HMO requires a mandatory licence if it’s occupied by five or more people forming more than one household, regardless of the number of storeys. Previously only properties with three or more storeys needed to be licensed meaning landlords of previously unlicensed HMOs may now need to licence their property with their local authority. Additionally, landlords must ensure rooms meet new minimum size requirements. 2 Minimum Energy Efficiency Standards (MEES) and the Energy Performance Certificate (EPC) MEES were introduced in April 2018. To begin with, the standards affected all new lets and tenancy renewals, but from April 2020 will cover all existing tenancies. Landlords must also ensure properties have a minimum EPC rating of E. It’s illegal to rent a property failing to meet the minimum rating, unless there’s an applicable exemption, such as being a listed building or holiday accommodation rented out for less than 4 months a year or let under a licence to occupy. Landlords will be unable to rent out properties until the works required to meet the minimum rating have been completed and can be fined up to £4,000 if found to be letting properties which fail to meet the standards. An EPC is valid for 10 years. 3 Stamp duty The Scottish government announced that from 25th January 2019, the Additional Dwelling Supplement would increase to 4% on purchases of most second properties. The ADS is paid when buying a second residential property worth £40,000 or more. It’s the equivalent of the Stamp Duty Land Tax and paid on top of the standard Land and Buildings Transaction Tax. 4 Multi-units and holiday lets Research by BVA BDRC 1 found 12% of landlords own a multi-unit property, rising to 34% amongst landlords with 20+ properties. The research also shows nearly one in 10 (9%) of landlords with 20+ properties now own a UK holiday let and that holiday lets are now the second most popular property type to own. 5


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Source: 1 BDRC Landlords Panel Q2 2018, 2 Excludes the day of upload/receipt, correct as at 31/01/2019

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.


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