For existing landlords who are not looking to expand their portfolio, not much. The changes really affect those who are thinking about becoming a landlord in the future. A recent Bank of England proposal has called for lenders to be much stricter and picky when it comes to deciding whether or not to grant a mortgage package to someone looking to buy a property to let.
Alongside this, the Bank of England has recommended that lenders take the applicants wider financial situation into consideration when assessing loan eligibility.
The new proposal will see the following being taken into consideration for BTL mortgage applicants:
- The tax liability associated with the property
- The landlord’s personal tax liabilities, living costs and “essential expenditure”
- The landlord’s additional income
- The costs a landlord might have to pay when renting out a property
The idea of all this is to ensure that the mortgage providers are more vigilant against lending to someone who will be unable to make repayments, should anything in their wider financial interests be affected. For BTL investor’s with a solid financial backing, there shouldn’t be any change but for speculative investors, they may find it trickier to obtain a BTL mortgage without the guarantees of being able to meet repayments.
Other News For Landlords
Away from the lending changes, landlords who are keeping their records digitally and providing regular updates to HMRC will be able to adopt a “pay-as-you-go” system with your tax bill. Look out for more updates on the “Making Tax Digital” programme being launched by the government.
The wear and tear allowance is undergoing reform. From April 2016 this is to be replaced by a new relief which allows residential landlords to deduct the actual cost of replacing furnishings.
Finally, the government is withdrawing the renewals allowance which, in the case of residential landlords, previously allowed landlords to claim tax relief for the cost of replacing domestic items such as furnishings and appliances.
Advice Available About Legislation Change
If you are a landlord or prospective landlord who wants to know more about the changes to legislation and how it could affect you, we are more than happy to offer advice and information; you can get in touch with our Norwich office by calling 01603 499258 or filling out a contact form here.