With everything that’s happening at the moment you’d be forgiven for forgetting that the new tax year is here and that there are some changes that the self-employed, and especially Buy to Let landlords, should take into consideration when planning ahead for the next financial year.
There are also, as of now, new considerations for landlords to take with regards to mortgage holidays, rental agreements and rental breaks in the midst of the COVID-19 regulations announced by the chancellor earlier in March.
Up to now the majority of the measures were welcomed, but there is also some concern that the guidelines for implementing them aren’t particularly clear and are causing some confusion, so we’ll take a look into this as well.
The current uncertainty has no solid end date, but there have been suggestions from the government that if the current lockdown has the intended effect then we should be able to start to return to some kind of normality in or around May, at which time those who have prepared properly for the tax changes and new legislation will begin to see the benefit.
Tax changes
The first change worth noting is that the threshold for national insurance contributions is being raised from £8,632 to £9,500 from the 6th of April, meaning that the typical self-employed person will see their annual tax bill reduced by £78.
Secondary, for those with any empty or untenanted residential properties the council tax for Band D properties is being increased by 3.9% to £1,817. You can find the banding of your property by visiting your local council’s website.
For anybody that has reached pensionable age after the 6th of April, their state pension will increase by 3.9%, or £6.60 per week to a total of £175.20 per week, and for those already receiving a state pension, they will see an increase of £5.05 per week to a total of £134.25.
For any landlords that still have student loans outstanding they’ll be pleased to learn that the threshold for repayment is being increased from £25,725 to £26,575 which will mean that, as the loan is repaid at 9% above the threshold, the average person who earns more will keep an extra £76.50 of their monthly income.
The good news for property owners is that the inheritance tax threshold for properties passed to direct descendants is increasing to £500,000, meaning that there will be no tax to pay for passing on your family home as long as it is under the threshold. Couples will be able to pass on an estate up to £1 million before paying any inheritance tax.
Finally, the downside is that mortgage tax relief will be ending from the 6th of April, and will affect higher and additional rate tax payers. Instead, they will receive a tax-credit, based on 20% of their mortgage interest payments.
COVID-19
There has been some confusion as to what a landlord’s obligations are towards tenants should they experience financial difficulty.
First and foremost, as a Buy to Let landlord you can request a mortgage holiday of up to three months from your bank, and most high street lenders have indicated that they now have something in place for that.
If that is the case, then the expectation is to be flexible and assist tenants with either some form of rent holiday (for the same period) or some kind of reduction whilst the government restrictions are in place. However, this does not mean that your tenant can simply stop paying their rent on the assumption that you are taking a mortgage holiday, so remember to keep communication with your tenant and/or letting agent open.
At this moment in time, whilst the government have announced that they will be stopping new evictions, there is currently no actual legislation making it law, and for nuisance tenants or tenants that refuse to pay their rent, existing orders are still enforceable and the previous process remains the same until the government announces that the legislation has passed through the commons.
Whilst none of us know how long we may need to observe these restrictions, it’s always useful to be prepared and keep abreast of any changes that may affect your investments.
