Landlords face £15,000 bill in ‘levelling up’ plan
The government has announced its “levelling up” plan to close the gap between rich and poor areas and to provide more opportunities to working people across the country. This is a long-term plan, with the aim to have all policies reached by 2030.
Part of this plan is to ensure that all rental properties are at a satisfactory level to create a fairer rental sector. Michael Gove, the secretary of state for levelling up, stated that he aims to halve the number of poor-quality rentals by 2030.
Although the specific policies have not been released, the information provided thus far indicates that private landlords will need to ensure that their properties meet set requirements.
Local authority properties currently abide by similar rules, however, it is unclear if the same standards will be set on private rental properties. If they are, then landlords of substandard properties could face bills of up to £15,000 to get the property to an acceptable level to rent. This comes as an additional burden to landlords who also have to pay for eco-upgrades as part of another government initiative.
More information regarding the specific policies will be announced by the government soon.
Interest rate rise
As you may have heard in the news, the Bank of England raised the Bank Rate from 0.25% to 0.5% in an effort to combat inflation. The bank informed that the move was necessary because rising energy bills would push inflation to above 7% by April. They expect to continue increasing the Bank Rate gradually over the next year.
When interest rates rise, mortgage lenders’ costs increase and they normally pass these costs on to borrowers. Therefore, if you have a mortgage that charges a variable interest rate, you will likely notice that your repayments increase.
For example, if you have a £150,000 mortgage in which the mortgage term is 20 years and the interest rate is 2.5%, then your monthly repayment will be £795. However, if the Bank Rate increases by 0.25%, the monthly repayment would rise by £18 to £813. If your mortgage charges a fixed interest rate, your repayments will not increase until the end of your fixed-rate period.
Although rising interest rates will result in higher costs for landlords, it’s important to remember that the rates have been very low over the last decade. Even though gradual rises are expected, it’s still a good time to get a buy-to-let mortgage while rates are below 1%.
Business rates change to close a loophole
The government detected that several second homeowners were using a loophole to avoid paying council tax.
Under the current system, second homeowners in England didn’t have to pay council tax if they intended to let the property as a holiday letting. This changed the status of the property to a business, in which business rates relief could be claimed.
However, many homeowners claimed that they were intending to let the property when they didn’t have any intention of doing so. Therefore, they didn’t have to pay council tax and could claim business rates relief.
From April 2023, the government plans to introduce rules so that only genuine holiday lettings will qualify for business rates relief, and other properties will be required to pay council tax.
The rules state that owners of second homes will need documented proof that the property is being let for a minimum of 70 days per year. In addition, the property must be available to rent for at least 140 days per year.
If both of these conditions are met, then the property owner does not need to pay council tax and qualifies for business rates relief.
Evidence of letting history can include the property website, rental details and receipts.
MTD extended to all VAT registered businesses
It’s that time again! The tax year is coming to a close, and new government regulations will be starting up in April. If you own a VAT registered business, you’ve likely heard of Making Tax Digital (MTD). MTD is a government initiative to make all tax-related matters digital – reducing mistakes and manual entry.
Currently, MTD is only mandatory for VAT registered businesses who are above the £85,000 VAT registration threshold. From April 2022, it will be extended to all VAT registered businesses, regardless of turnover. This includes businesses that are voluntarily registered for VAT.
From next year, April 2023, MTD will be extended to all businesses, including sole proprietorships and landlords who earn more than £10,000 (gross) per tax year.
There are two parts to MTD – digital records and digital tax returns. To be compliant with MTD, you must keep digital records of all of your business transactions. This means using online invoicing software or keeping a record of your invoices and payment receipts backed up on your computer. It will soon also be mandatory to complete your Self Assessment tax return online.