Legislation & Buy-to-let Review

So, 2015 is over and if the last year is anything to go by, we can all look forward to a prosperous and eventful 2016.  If you are an Exeter homeowner, you will be pleased to hear that property prices increased by £314.77 per week in 2015*.  I always find that satisfying to hear, knowing that while having a week holiday sitting on a beach or on the moors, my property is busy earning money.  On the flip side however, for the people not yet on the housing ladder, this is making their aspirations of homeownership a distant dream.

For landlords, 2016 is going to see some tough new changes.  We have already seen in 2015 the introduction of new section 21 notices, smoke & carbon monoxide regulations, ‘how to rent’ checklists and the Deregulation Act.  2016 is set to bring the ‘right to rent’ regulations, introduced in the Immigration Act, which will require all tenants to be checked for immigration status and hefty civil fines on landlords for non-compliance, this could even be increased to prison sentences under the Immigration Bill 2015. So called ‘revenge evictions’ are now a thing of the past and landlords will have to ensure they deal with maintenance issues quickly and efficiently if they wish to serve notice.

Currently, a wear and tear allowance is available to landlords who let furnished residential accommodation. The allowance is designed to cover the cost of replacing furniture and furnishings and is available regardless of whether the landlord has actually spent any money on replacements in the tax year.

However, in the summer 2015 Budget the Chancellor announced plans to replace the allowance with a deduction for the actual costs of replacement. The new rules will apply from 1 April 2016 for corporation tax purposes and 6 April 2016 for income tax purposes.

In the Autumn Statement, the Chancellor announced that buy-to-let landlords and people buying second homes will face an additional 3% surcharge on each band of their stamp duty land tax bill, commencing from April 2016. The rate of duty will be as follows: 

Property value	Standard rate(currently)	Buy-to-let/second home rate (from April 2016)
0 -£125,000	0%	3%
£125 – £250,000	2%	5%
£250 – £925,000	5%	8%
£925 – £1.5m	10%	13%
over £1.5m	12%	15%

If you are lucky enough to be in a position to own one or more investment properties, you will have benefitted from the property value increases and rising rents, which should more than cover the expense of the extra due diligence, loss of the wear and tear allowance and extra stamp duty.  

For tenants, it is likely that rents will rise as demand continues to outstrip supply, even with the many properties that are being built at Cranbrook and other new developments.  These rises will ensure that a higher standard of property is available however, as landlords will have to make sure their properties are safe, well maintained and only let to people who are allowed to live there.

Similarly for buyers, it is likely that prices will continue to rise throughout the year.  Like I mentioned in last months’ column, this is good if you are downsizing and maybe even if you are upsizing in certain circumstances, however first time buyers will need to save longer to build the required deposit and fees.

The Help to Buy ISA has been introduced by the government to help first time buyers put money aside for that all important first property purchase. They can save up to £200 a month, which the government will then top up by 25%, up to a maximum of £3,000. For couples, this could mean a considerable £6000 towards their first home together.  

Well, that’s a bit of a mixed bag, but in general I believe most of these points will be good for the property market and will raise the quality of accommodation.  The property market continues to throw curve balls so watch this space for what’s to come in 2016!

  

*Data taken from Zoopla on 09/12/2015