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.

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.

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.

When buying a new-build property you will be asked to pay an up-front reservation fee to secure your reservation of the property. Once you have paid the reservation fee the property should be taken off the market and not offered to any other potential buyers.

In a thriving property market with several buyers vying for each property it can be comforting to know that you have secured the property you want. Be warned though that when buying a new-build you will be pressured from day one, to pay the reservation fee and then to move very quickly to exchange of contracts.

There are a few pitfalls to watch out for when paying an up-front reservation fee:-

• Make sure that the reservation fee is refundable if you are unable to proceed. Some developers’ reservations forms state that the reservation fee is ‘non-refundable’.
• Ask who is going to hold the reservation fee? Ideally it should be held by the developer’s solicitor in their client account. Should the developer then go bankrupt or fail to complete the development at least you will be able to get your money back.
• Before reserving a new-build property, particularly if buying off-plan, ask for confirmation in writing of the estimated date of physical completion. Remember if the build is delayed due to shortage of manpower or materials your reservation fee and exchange deposit are held by the developer.
• Before paying any reservation fee make sure that your finances are in place and that, if you need a mortgage, you can get one. Some types of property development are not favoured by mortgage lenders. These include flats above shops/offices, high rise blocks of flats and certain types of construction.
• Ask whether the property is to be covered by a build guarantee such as NHBC – without this you will find it difficult to obtain a mortgage. Some developers offer build insurance via Zurich as an alternative to the NHBC guarantee.
• Once your reservation fee has been paid you will be given a deadline to exchange contracts – this is usually 28 days. This means that you will need to have your mortgage and finances in place, you will need to have appointed your solicitor and all pre-contract checks and searches will need to take place within this time frame. If you fail to meet the deadline the reservation can be cancelled and the property sold elsewhere.
• Ensure that your solicitor is notified that this is a new-build purchase and check that they have the capacity to move quickly. Note some solicitors charge a premium for new-build property because of the complexity and the time scales involved.
• Buyers of new-build properties are protected by the Consumer Code for Home Builders 2010 which governs developers and provides mitigation service should you have a complaint against a property developer.

For a free and without obligation conveyancing quote for your new-build purchase please contact Sharon Buthlay on 01638 576478 or e mail Sharon@cms-uk.co.uk.

The demand for property has never been higher; agents across the country are reporting fewer properties coming onto their books. Competition between investors and wannabe home owners is leading to price spikes, gazumping and even contract races.

So how do you make sure that you are first in the queue when it comes to securing the property you want?

1. You must have your finance in place. Before you even look for a property shop around, find out how much you can afford to borrow and get a mortgage agreement in principle. Get it in writing so you can show it to estate agents.

2. Get a good solicitor in place. You need to be able to demonstrate that you can act quickly as soon as your offer is accepted.

3. Don’t make silly offers. Vendors know that prices are on the rise and will not be minded to accept low offers – in fact low offers often offend. So do your homework, check out on the property web sites how much similar properties are going for and offer a sensible price.

4. Make a friend of the estate agents. Don’t do everything on-line. You want to get to know the agent so that they will alert you to every new property that comes onto the market. Take the time to go into your local estate agents or those local to the area you want to buy in. Take your mortgage in principle and your solicitor details, even your savings statement to show you have the deposit and are able to move quickly.

5. Scour the local papers to see whether any property is being advertised privately. I bought my first house this way.

6. Be pro-active, if you see an empty property that isn’t on the market, pop a note through the door with your details and ask them to call you if the property comes up for sale.

7. Contact the probate department of local solicitors – they often have property to sell on behalf of their clients and you may get something before it comes onto the market.

8. When you view a property don’t make disparaging remarks in front of the Vendor or their estate agent. Always be polite. The home owner isn’t going to choose you over someone else if you have been rude about their home.

9. View everything that comes onto the market in your price range – you never know what you are going to fall in love with.

10. Above all don’t dither, if it’s the right property then make an offer, put it in writing and make sure the estate agent or Vendor has your contact details. Follow up your offer the next day and every day until you hear whether it’s accepted.

The shock spike in inflation from 0% to 0.1% has led to speculation that a rate rise could be upon us as soon as early 2016.

Interest rates have now remained stable since March 2009 and many in the property industry are predicting a rate rise in the first quarter of 2016.

Hargreaves Landsdown senior economist Ben Brettell says: “The rise in the core (inflation) figure suggests that underlying inflationary pressures could be building in the economy, and is possibly the clearest indication yet that the Bank of England might have to raise interest rates sooner rather than later”

With many borrowers still on favourable base rate or tracker mortgages the question is whether to jump to a fixed rate now or hold on for another six months.

Some banks have already begun to withdraw their lowest-interest mortgage deals in anticipation of a rate rise, which has led to an upturn in re-mortgage applications.

However, as the lower, more attractive mortgage deals disappear, so do new buyers – nervous of all the talk of rate rises many home movers are sitting on the fence waiting to see what happens.

The general consensus is that when mortgage rates do begin to rise it will be slowly and steadily, with any temporary disruption to the property industry levelling out quickly as demand for home ownership continues at an ever increasing pace.