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Archive for October, 2015

Protecting Your Buy To Let Pension Pot

Thursday, October 29th, 2015

Currently private Landlords are able to offset the amount of mortgage interest they pay at the same rate that they pay their tax. This is set to change from 2016 and many Landlords may find that their income from property is slashed.

New tax rules from 2016

From 2016 the taxation rules on tax relief for loan interest on buy to let are to change:

  • in 2017 to 2018 the deduction of loan interest from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction (currently 20%)
  • in 2018 to 2019, 50% deduction of loan interest from property income and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% deduction of loan interest and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction

This will hit Landlords hard, particularly in areas where it is not feasible to raise rents to offset the loss of tax relief.So what can a private Landlord do to maximise tax relief and income:-

Maximise tax relief available

If you are a private Landlord and part of a couple then you are each allowed your own Capital Gains Tax allowance and personal tax allowance (currently £10,600) so make the most of this by ensuring that the property is held in joint names. If the property is currently owned in a sole name this can be easily rectified by a Transfer of Equity into joint names – get quote here.

If one of you is earning less than the other you can divide the property shares between you so that the lesser earner is deemed to received more rental income than the higher earner. This can help to avoid pushing one or both of you into the higher rate tax bracket in the first place. The higher rate tax of 40% kicks in at £42,385. The 45% rate kicks in at taxable income over £150,000.

To divide the property shares you will need to:-

  • Hold the property as tenants in common
  • Have a Declaration of Trust setting out the respective shares drawn up.

Contact us for a quote on 01638 576478 or 0845 060 33 55

National Insurance Contributions and Buy To Let

Private Buy to Let Landlords should not be paying Class 2 NICs on buy to let rental income if the property they are letting is not classed as running a business. So if you are letting out your property while working away or abroad you should not be paying Class 2 NICs.

You will be classed as running a business and subject to Class 2 NICs if:

  • being a landlord is your main job
  • you rent out more than one property
  • you’re buying new properties to rent out

You don’t pay National Insurance on your rental income if you’re not running a property business – even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements.

Allowable Expenses

To minimise taxation you are still allowed to claim back genuine expenses before tax as follows:-

  • Letting agents fees.
  • Securing a tenant i.e. Costs for advertising, letting agency fees, tenancy agreement preparation, credit checking and referencing, deposit protection and creating an inventory.
  • Buildings and contents insurance premiums.
  • Maintenance and repairs, including repairs of white goods.
  • Furniture. You may currently claim 10% of the cost of wear and tear on the furniture. This is changing so that from April 2016 you may only claim back what you have actually spent rather than claiming a notional sum. You may also claim back the actual cost of replacing furniture (but not installing it in the first place).
  • Ground rent and service charges and any communal charges i.e. gardening.
  • During periods when there is no tenant you may claim back the cost of any utility bills and council tax which you pay
  • General expenses – you may claim for stationery, travelling to and from the property and phone calls are all legitimate expenses.
  • Accountancy fees.

Now Is The Time To Buy

Tuesday, October 13th, 2015

As autumn leaves fall, now is the time that many of us put aside all thoughts of moving home or making decisions until after the festive season and the winter are over. What could be worse than trudging around estate agents and properties in the cold and wet when you could be at home in front of the fire watching the latest box set?

You may have heard the saying ‘he who hesitates is lost’ and this could well be the case for aspiring home owners over this autumn/winter period.  House prices are rising at the rate of 5.2% a year.  This means that a whopping £10,400 will be added to the price of a £200,000 home over a 12 month period.

Demand for home ownership has never been higher as incomes rise in real terms and mortgage rates continue to stay low.

The return of the 95% mortgage is now making it possible for first time buyers to achieve that all important leap onto the housing ladder.

Although the 95% mortgage may come with a higher interest rate, the temptation to save for a bigger and bigger deposit is outweighed by the fact that house prices are rising faster than incomes.  This month’s Average Price House Watch revealed that house prices are up on average by 0.2% in the past month alone. This means that if you buy with a 5% deposit, pay the higher interest rate, you can then re-mortgage to a lower rate in a couple of years when the value of your property has increased.

Lack of affordable homes for first time buyers means that competition for homes remains fierce. Today’s buyers need to be armed with their deposit, a mortgage agreement in principle and a good solicitor ready to swing into action if they are to have any chance at getting an offer accepted.

CMS have been providing first class conveyancing at a competitive price since 1995. For a conveyancing quote please visit our web-site www.conveyancing-cms.co.uk or call us on 0845 060 33 55 or 01638 576478.

How To Beat The Stress Of Buying A Property

Thursday, October 1st, 2015

Why is the property buying process so stressful? With over 40 years experience in the property industry, firstly as a Property Lawyer myself and the past 15 years as Director of Conveyancing Marketing Services, this is one of the questions I am asked more than any other.

The answer is that it doesn’t have to be stressful if you follow my tips and hints to make buying a property a walk in the park.

Know How Much You Can Afford To Spend On A Property.

My number one tip is to do your maths homework before you even look for a property.  Since the Mortgage Market Review lenders have much stricter criteria on who they will lend to and how much they will lend.  Speak to your bank, building society or a good mortgage adviser to find out how much you can borrow before you look for a property.

Get Quotes.

Get quotes for everything. Items like legal expenses, stamp duty, mortgage fees, removals and surveys all add up and you need to build them into your total property budget.

Allow Enough Time.

Don’t underestimate the time it takes to buy a property. You need to view lots of properties, negotiate an offer, arrange finance and have the legal work done.  The whole process can take 6 months or more depending on how long the property chain above you is. So allow plenty of time and never, ever give notice on rented accommodation until your solicitor tells you that you have exchanged – otherwise you risk making yourself homeless.

Make Friends With The Property Professionals.

Be polite and professional at all times with your estate agent, surveyor, mortgage advisor and solicitor.  Remember they are all busy people and have their jobs to do.  Keep in touch, but don’t overdo it.  Your solicitor, in particular, will be very busy.  To review the contract paperwork on a property can take several hours, particularly if it is new-build or leasehold. Their job is to make sure that you legally own the property and can sell it in the future with no problems.  Constant calls and e mails have the effect of slowing the whole process down.

Follow Instructions.

Read everything you are sent carefully, this includes the estate agents particulars, the mortgage offer and your solicitor’s communications. You are required by law to provide identity documents and Anti Money Laundering information to your solicitor. You must provide the correct documents that the solicitor asks you for.  You will also be asked to sign numerous documents and some of these will need to be witnessed – ensure you read the instructions as returning improperly signed documents will delay your purchase.