Year: 2020

Size matters when it comes to tenant satisfaction, with renters rating small-scale, amateur landlords more highly than portfolio landlords and agents.

Research programme RentBetter’s report on the impact of PRS tenancy reform in Scotland found more contentment than generally thought, following the introduction of private residential tenancies three years ago.

It says this is linked to the fact tenancies generally don’t turn over quickly.

“This finding might suggest a higher degree of consumer satisfaction in private renting than is often supposed,” says author, Professor Douglas Robertson.

“This was also found to be linked to the landlord type, with what many considered the small-scale, more amateur, so-called ‘cottage industry’ providers.

The finding jars somewhat with another policy ambition, that of encouraging a higher degree of professionalism across the sector.”

His research finds that the importance of maintaining positive, trusting relationships with the landlord was a strong theme from tenants, who emphasised the benefit of proactive, person-centred landlord approaches – most often provided by one property or small portfolio landlords.

But RentBetter reports that up to a quarter of landlords are questioning whether to continue operating as a business due to changes in taxes and tenancies.

Says Robertson: “One worry that arises out from this is who exactly is thinking of getting out. If it is the small amateur landlords, then policy will have delivered on professionalising the sector, but for many tenants it is these very same landlords who they have invested so much faith in.”

Blog Post from Landlord Zone

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Those of you who keep up with all the latest tax rules will be well aware of the upcoming Making Tax Digital (MTD) regulatory changes from HMRC and will be making preparations for this biggest ever tax change.

For the 99% of landlords who prefer not to think about tax at all, this news might be worrying. You might be wondering what the new regulations are all about and how they’ll affect you.

Worry not ‒ APARI’s team of tax nerds love simplifying tax rules into language understood by real human beings. You also have a bit of time to prepare and get used to using new tax software, but more on that later.

Here’s what you need to know…

What is Making Tax Digital?

Making Tax Digital (or MTD, for short) are a set of new regulations from HMRC designed to transition the UK to a more efficient and accurate digital tax system. Some businesses paying VAT have already transitioned to MTD and will apply to every VAT-eligible company from April 2022.

MTD for Income Tax was announced by the Government in July 2020 and will affect landlords, self-employed and tradespeople.

How to comply with Making Tax Digital for Income Tax

To meet the requirements for the MTD regulations, landlords will need to keep digital records of property-related income and expenses, submitting a summary directly to HMRC via registered tax software once every quarter.

Additionally, you will also need to submit an end of year report, finalising all accounts and other income to form your self-assessment. The right tax software will compile these reports for you, based on your digital accounts, and submit them directly to HMRC.

The result is very similar to now ‒ MTD won’t change what you need to pay or when you need to pay it.

Key Changes: a) use MTD software; b) keep digital records and c) submit account summaries once a quarter to HMRC.

Who does MTD for Income Tax apply to?

Making Tax Digital for Income Tax is for UK landlords who usually submit a Self Assessment tax return. It is a requirement for anyone with more than £10,000 of combined turnover from business and property income.

When does Making Tax Digital for Income Tax come into effect?

Making Tax Digital for Income Tax comes into effect from the 6th April 2023.

It’s possible to voluntarily register for MTD for Income Tax before then, which will allow you to get ahead of the game and familiarise yourself with the MTD process. Don’t worry, you can still revert back to a standard tax return if you want.

Using tax software now could also save you money on accounting fees and provide you with a summary of your profit and loss as well as real-time estimates of your tax liability.

Get started with a FREE APARI account today.

Understanding the MTD process

While the process for MTD is roughly the same for everyone, every piece of MTD software will work a bit differently. To give you an idea of what to expect, here’s how APARI MTD software works:

Step 1: Keep digital records

You will need to record relevant transactions, both income and expenses, in your MTD software. Some software, like APARI, allows you to upload bank statements or your existing spreadsheet to help automate and speed up the process. You can then tag the relevant transactions and assign them to your properties.

Step 2: Sign up for MTD

Complete the sign-up process on the HMRC website and enter your Government Gateway ID into your tax software. This allows you to submit data to HMRC securely via your software.

Step 3: Receive reminders about key dates

APARI will remind you about key dates, such as your quarterly and annual tax submissions, as well as insurance and tenancy renewals.

Step 4: Submit your tax information to HMRC directly from APARI

Your tax software should automatically prepare your quarterly summaries from your digital records, ready to review and submit directly to HMRC. You’ll get an immediate confirmation from HMRC.

Then, at year-end, you finalise your property income, add in any other tax information and complete a legal declaration that all information has been submitted. Finally, you need to pay your tax bill by the deadline (APARI will remind you). You should have an accurate estimate of your tax liability in advance, so there shouldn’t be any nasty surprises.

And that’s it! I know it probably sounds complicated just now, but with the right tax software it should make accounting easier, faster, cheaper and more accurate.

Pushing Capital Gains Tax (CGT) rates up to the levels of income tax could spark a mass exodus of landlords from the market, property experts warn.

This follows a report from the Government’s tax advisers suggesting that Chancellor Rishi Sunak could bring CGT – currently 28% on residential property and 20% on other assets – into line with income tax so that higher rate taxpayers face a flat rate of 40 or 45%.

It also suggests reducing the annual CGT allowance threshold from £12,300 to £5,000 or less.

David Alexander, joint CEO of apropos, says this potential increase in tax payments is extremely risky and would have an enormously detrimental impact on the housing market, stifle growth and discourage investment.

“Any large-scale exit would flood the market with homes, depressing prices at a time when the property sector is in desperate need of support,” he says.

Paul Shamplina of Landlord Action, says: An increase in CGT is likely to prompt a flood of landlords selling up before the deadline, further reducing the supply of rental properties available to tenants.”

Income vs gain

Currently, doing up properties to sell them on is considered an income while holding onto property and then selling it for a profit is counted as CGT.

The Office of Tax Simplification’s (OTS) defends its recommendations, as it says not understanding the difference between these investing and trading activities can lead to non-compliance, where someone can incorrectly declare a capital gain rather than a trading profit.

“A greater alignment of rates would create a more neutral tax system, in which people were left free to make the right decisions for their business or family without the complexity of having to worry about unwittingly stumbling across the wrong side of a boundary,” it says.

It also acknowledges that landlords find it difficult not knowing their final CGT liability until they know their annual income tax liability, particularly when completing a 30-day tax return for residential property.

About £8.3bn of CGT was paid in 2017-18, compared with £180bn of income tax by 31.2 million individual taxpayers.

Blog Post Landlord Zone

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Young people are being forced to choose between racking up rent debts and risking their health due to rules limiting what they can claim for housing benefit.

Those under 35 who are now relying on benefit to pay their rent for the first time will find that support will only be available to cover the cost of a room in a shared house.

The National Residential Landlords Association is warning that this will force many young renters to choose between building unsustainable debts with all the anxieties to go with it or moving into cheaper, shared housing. Apart from forcing people to move home in the middle of restrictions, this could potentially involve living with strangers with all the health risks that this poses during the COVID-19 pandemic.

In a letter to the Welfare Minister, Will Quince, the NRLA has called on the Government to urgently adopt the recommendations of the Social Security Advisory Committee and suspend the Shared Accommodation Rate rule. The NRLA argues that this should be for a period of at least a year.

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:

“It is unacceptable that younger renters are being forced to choose between building debts or compromising their health during a pandemic.

“Whilst the vast majority of landlords have done everything they can to support renters whose finances have been hit due to the virus, it cannot be right that landlords and tenants are left to muddle through without greater support.

“If money can be found to subsidise meals out, the Government must find the finances needed to support tenants, and in turn landlords, to pay off rent arrears, sustain tenancies and protect people’s health.”

The call comes as government statistics show a significant increase in the proportion of Universal Credit claimants in the younger age brackets.

In the four weeks to the 8th October, the proportion of claimants aged between 16 and 24 was just over 27 per cent, up from 21 per cent in four weeks to the 12th March.

• A copy of the NRLA’s letter to Will Quince MP can be accessed here.
  The Government’s latest Universal Credit Statistics can be accessed at:  https://www.gov.uk/government/publications/universal-credit-statistics-29-april-2013-to-8-october-2020/universal-credit-statistics-29-april-2013-to-8-october-2020. It notes that:
• “The proportion of Universal Credit who are young people has increased to its highest level since November 2017. In the 4 weeks to 8 October 2020, the proportion of Universal Credit claimants who were aged between 16 and 24 was 27.1%, compared with 21.1% in the 4 weeks to 12 March 2020.”
• In May the Social Security Advisory Committee wrote to the Work and Pensions Secretary regarding the Government’s response to the COVID-19 pandemic. This letter can be accessed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/888504/ssac-letter-to-secretary-of-state-covid.pdf.

Blog Post from NARLA

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The government is urging agents and landlords to be “considerate” when deciding whether to accept tenants on the basis of their references.

The unusual comment came from Housing Minister Chris Pincher in a written Parliamentary answer to Vicky Foxcroft, a Labour MP.

Pincher said “contextual information” from previous landlords and agents, regarding a tenant’s payment holidays, should contribute to the decision.

Foxcroft, who represents the London constituency of Lewisham Deptford, asked what steps were being taken by the Ministry of Housing, Communities and Local Government to protect the right to a fair reference for tenants in the private rental sector.

Pincher responded: “The reference process is a private matter between the parties involved and not something it would be appropriate for the government to intervene in.

“Landlords and letting agents may wish to obtain references from their prospective tenant’s former landlords or letting agent but cannot charge the tenant a fee for this process.

“As part of the referencing process, landlords may take into account various factors when deciding whether to let to a tenant, including previous or outstanding rent arrears.

“Where these factors have been adversely affected by circumstances arising from the Coronavirus outbreak, we would encourage landlords and letting agents to be considerate of this when deciding whether to accept or recommend such tenants.

“When completing the referencing process, both the previous landlord and prospective tenant should therefore provide any necessary contextual information to aid these considerations. For example, this could include details of any voluntary arrangements or payment holidays which were agreed.”

Foxcroft also asked Pincher what steps his department was taking to support shielding private tenants whose landlord may request that a third party access their property at short notice – for example, for maintenance.

Pincher told her: “Tenants have a right to the quiet enjoyment of their property and must be given at least 24 hours’ notice of any visit to the property. If a tenant is self-isolating, no work should be carried out in their home unless it is to remedy a direct risk that affects their safety or the safety of their household.

“Landlords of clinically extremely vulnerable people can carry out routine repairs and inspections, provided the latest guidance on social distancing, working safely in people’s homes and guidance for clinically extremely vulnerable individuals is followed.

“It remains a crime for a landlord to harass a tenant. Tenants who are concerned should contact their local authority or the police.”

Blog Post from Letting Agent Today

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Lockdown 2 should be no more than a blip for the UK property market, according to new research.

The property market is showing far more resilience to the second national lockdown than it did to the first, which saw the entire housing market, from viewings to home moves, put on hold for seven weeks.

The number of valuations of homes being put up for sale was up by 38 per cent last week following Boris Johnson’s Saturday announcement of the lockdown.

However, the number of new viewings dropped 15 per cent compared to the previous week, according to Knight Frank.

The estate agent said that while many branches had reported a drop in the number of buyers contacting them to ask about properties or arrange viewings — in part because people weren’t sure if the property market would be locked down or not — others had reported no difference on the previous week.

Meanwhile, the number of exchanges was 11 per cent higher as the number of sales agreed continued to grow thanks to the boom in home sales inspired by the stamp duty holiday.

Tom Bill, head of UK residential research at Knight Frank, said: “The early days of a second national lockdown in England bear little resemblance to the first for the property market. Agents have remained open and the high volume of transactions agreed since the market re-started in May will continue to progress.

“However, in a market so driven by sentiment, it would be wrong to conclude that it will be business as usual.”

Mr Bill said that provided this second lockdown is not extended beyond the projected end date of December 2 it should put no more than “a small dent” in the property market.

Can London house prices defy a ‘second wave’ of coronavirus?
However, he sounded a note of caution against being overly optimistic.

“Whether that dent becomes bigger or disappears in coming months depends on two events outside the control of the property market — the arrival of a treatment or vaccine for Covid-19 and the avoidance of a no-deal cliff-edge Brexit.”

The Knight Frank research came as Strutt and Parker became the latest property group to upgrade their house price forecast.

The consultancy had previously predicted that UK house priceswould fall by one per cent in 2020. But following a busy summer, it now expects price growth to remain flat at worst, with a best-case scenario of five per cent price growth.

Guy Robinson, head of residential agency at Strutt and Parker, said: “Over the summer the industry has witnessed what can only be described as a ‘mini-boom’, with unexpectedly high activity levels across the UK, driven by pent-up demand after the property market was shut down for nearly three months…

“Usually, the market naturally starts to slow down at this time of year but after the busiest summer that we can remember, there are a huge number of transactions in the pipeline for the coming weeks – so it is important that the market is kept moving from now until the spring when the Stamp Duty holiday is due to come to an end.”

Another forecast by JLL expected London house prices to remain flat next year but said they could see five-year price growth of more than 20 per cent.

Blog Post from Evening Standard H&P

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A legal expert who advises agents and landlords should consider serving a second Section 8 notice if their tenants owe more than six months rent, even though their first notice had not come into force.

The reason being because of the important change to six months’ rental arrears as the notice period for this has been drastically reduced from six months down to just four weeks.

Robert Bolwell, senior partner at Dutton Gregory, said: “One of the tantalising questions now is, what do I do if I have rent arrears of five months? Do I serve a notice now for six months’ expiration date or do I wait until I go over the six month mark?

“At six months, the rules say your Section 8 notice period (on ground eight) can actually be four weeks.”

Bolwell the head of the firm’s landlord and tenant department, added: “We’re looking at situations now where the clients have served a six-month notice initially, when the rent arrears are quite small, but when we get to that six months [of arrears] mark, we might be serving another notice because…of the shorter period [of 4 weeks’ notice]. The general rule is, it’s never wrong to serve additional notices.”

He advises landlords and agents whose tenants have racked up three to four months of rental arrears could be served with a notice and then “keeping an eye on those rent arrears and, if things are getting worse, when you hit that six month mark, serve another one for four weeks. Because that might enable you to start proceedings more quickly than waiting for your first notice to expire.”

Bolwell says that because of the courts’ backlog in possession order cases “the indicators suggest that you will save time if you can go down the accelerated route than if you go down the normal route.”

He believes that if agents and landlords follow this logic then it could save them “weeks, maybe even months” to achieve being granted a possession order.

However there is a caveat that it could probably take longer for cases to be heard as courts were able to hear ten cases per hour but as of now it could be no more than three in one hour.

Blog Post from PIMS.co.uk

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Southwark has recently sent out a letter to thousands of private landlords asking them not to evictExpel (someone) from a property, esp. with the support of the law
any of their tenants.

The authority says that due to the second wave of Covid cases with increasing numbers of patients in hospitals together with the daily rise of unemployment across the country, the housing crisis is becoming worse.

The council says that when tenants are evicted it is left to the authority to house people who have been made homeless.

With the state of the economy coupled with severe job losses the authority says that is has seen its housing list rise from 10,000 to 13,000 over the last few months; cases of people living on the streets has increased to 17.

Although there has been some funding from the government, the authority stated that “it is in no way commensurate with the need in Southwark.”

In the spring Southwark received £33,000 from the government for the ‘Everyone In’ project to help house rough sleepers and another £545,000 for council services to help those who it cannot house under constitutional duty; the majority of cases are classed as vulnerable.

Last week the government gave the council a further £1m for housing as well as an extra £30m was made available for all of the council’s services.

A council spokeswoman says: “What is desperately needed is long term, consistent and adequate funding from the government to tackle homelessness and end rough sleeping – particularly for those who we cannot lawfully support – and for the government to make good on its pledge to cover our COVID related costs.

“As well as this, we need private landlords to play their part and keep a roof over tenants’ heads, and to help with the supply of homes for people as properties become empty. It should never happen that we see people becoming homeless, especially as we approach colder months, and the more difficult economic times ahead.”

Besides urging landlords not to evict tenants the letter asks them to enrol in the council’s accreditation and guaranteed rent scheme, so both landlords and tenants can feel protected with secure housing and dependable rent payments.

Blog Post from PIMS.co.uk

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