Buy to Let
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We would recommend that before considering buying an investment property such as a Buy to Let you should consider the tax implications and seek clarification from your Accountant. The cut in tax relief on mortgage interest has been phased in and in the tax year 2019/2020 a Landlord is only able to claim 25% of their mortgage tax relief.
Other cost issues to be taken into consideration are (a) the fees that letting agents can charge have been restricted and the deposit requested at the start of the tenancy has been capped at 5 weeks’ rent. Agents cannot claim the cost of obtaining references and preparing inventories and this cost has been passed to the Landlord; (b) the higher rates of stamp duty land tax payable on second homes; (c) if you have a mortgage to re-pay you will need to ensure that you have contingency plans to make the monthly payments should the property be empty or the tenant fail to pay the rent resulting in you needing to take possession proceeding and (d) you should also consider the issue of Capital Gains Tax which will be payable when you wish to sell the property.
If you are purchasing a flat you will be responsible to pay the ground rent and service charges to the landlord and will also need to check that the lease on the flat allows you to let the property on an Assured Shorthold Tenancy before starting the buying process.
If you do not instruct letting agents to look after the property and tenants on your behalf, you will need to give your contact details to the tenant in order that they can contact you regarding any repairs required to the property and especially in an emergency should there be for example flooding due to a burst water pipe. You as landlord will be responsible for the maintenance of the property both inside and out which may include the garden (if the tenants are not prepared to maintain the garden area).
You will be required to have landlord’s buildings insurance cover for the property and contents if the property is let furnished. You should also consider obtaining a landlord and rent policy as well which will cover period when rent is not being paid and legal expenses of taking possession proceedings to evict a tenant.
If the property has a gas supply, you will need to provide the tenant annually with a Landlord’s Gas Safety Certificate covering all gas appliances in the property, together with the following:-
- How to Rent – the checklist for renting in England published on the gov.uk website.
- Deposit Scheme paperwork in order that the tenant can obtain the return of their deposit when the tenancy comes to an end.
- Energy Performance Certificate all properties which are let must have an EPC rating of at least “E”.
If you do not provide the tenant with all of the above documents, if the tenancy commences or is renewed after 1 October 2015 you will not be able to serve a Section 21 Notice to evict the tenant. This is a no fault eviction notice.
You should also provide the tenant with a record of any electrical inspections as all electrical appliances must be safe and checked every 5 years. The property needs to have working smoke alarms and carbon monoxide alarms at the start of the tenancy which will need to be regularly checked. You will also need to consider whether a Legionella Risk Assessment needs to be undertaken.
If you have purchased an investment property with a view to subletting, we can produce the Assured Shorthold Tenancy on your behalf.
For further information on the Stamp Duty Land Tax changes coming into effect for second properties from 1st April 2016, please click here.
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