Rental housing prospects in London

A popular global city, London attracts talents from the UK and abroad to live and work here.

According to an article published on Forbes, although property prices in London have been falling recently, the rental housing market is bucking the trend, with rents continue to increase year after year. Much of this phenomenon is due to a reduced supply of rental homes contributed by a number of factors including:

  • The Government is gradually phasing out the tax relief that landlords of residential properties receive for financial costs. This is to be replaced by a 20% tax credit that will see higher-rate taxpayers paying more taxes.
  • HMRC has rolled out Higher Rates on Additional Dwellings (HRAD), resulting in the buy-to-let Stamp Duty Land Tax (SDLT) increasing by 3% for every property band. For example, before April 2016, the SDLT on a £125,000 buy-to-let property was zero, but now it is 3%.

Despite these changes, the population growth for London is projected at 40% over the next 30 years, so the residential rental market looks to be a strong investment in the long term.

Financial considerations as a residential landlord

As a residential landlord, you assume certain duties towards the tenants and government when letting a property. For example, you are legally bound to do the following:

  • Inform your mortgage lender if you are letting or plan to let a property – If there is a mortgage on the property you are letting out, there may be clauses on who is allowed to stay there other than you and your household. Depending on the length of stay, you may be required to switch to a different mortgage.
  • Declare rental revenue against your Income Tax – Rental revenue makes up part of your total income and needs to be declared on your annual Self-Assessment tax return.
  • Pay Capital Gains Tax on sold rental property – This applies when you make a profit from the sale of a rental property that you have bought and had ownership of for over three years.
  • Provide assurance with the Tenancy Deposit Scheme – This is a programme to protect the tenants’ deposits by placing it in a government-backed scheme. The landlord must return the deposit within ten days of the lease ending, provided both parties agree. In the event of a dispute, the deposit will be protected in the scheme until the issue is sorted out.
Residential landlords

Shifting tax regulations

As reported by Propertymark, there have been a number of measures taken by the UK government targeting the tax processes and requirements of landlords and buy-to-let investors, resulting in higher tax burdens and lowered rent profits. The need for landlords to have an accountant who follows such changing laws and advises them to mitigate risks accordingly has never been more prevalent. At Tax Agility Chartered Accountants, our specialist accountants for landlords in London have the expertise in the rental housing market and associated fiscal regulations to help you maximise your rental income.

Our specialist accountants for landlord can assist with:

  • Getting special tax reliefs available to landlords
  • Purchasing properties with tax-efficiency in mind
  • Tracking changes that will impact on your cash flow, tax position or accounting practices
  • Preparing and submit landlord accounts and personal tax return in a timely and accurate manner
  • Remembering any interim and final payments through the year

Airbnb hosts or Airbnb landlords

A disruptive innovation, Airbnb is one of the most popular rental service companies nowadays and naturally, many Airbnb hosts have questions pertaining to taxes. If you are an Airbnb host who rents out your property (not your main residence) throughout the year and knows you will be taxed on your rental profits like any other businesses, then it is worth checking if you are qualified for Furnished Holiday Letting (FHL) and take advantage of the law. Talk to our expert tax accountants today so we can better understand your situations and advise accordingly.

‘Making Tax Digital’ for landlords

HMRC has begun to require all businesses to transit to ‘Making Tax Digital’ services, an initiative plans to make tax administration more effective, efficient and easier for taxpayers through a fully digital tax system.

A common way that clients of accountants digitise their tax information is by subscribing to an online cloud software package designed for business owners such as Xero through their existing accountants. Designed for business owners who may not necessarily know how the ins and outs of accounting, Xero is simple, secure, user-friendly and maintenance-free. The dashboard overview provides a clear view of the most important financial information, making record-keeping easy for residential landlords.

Xero also offers other cloud services useful for landlords such as:

  • ArthurOnline – A complete web and mobile solution for property managers and landlords with apps for their tenants, contractors, agents and owners.
  • Re-Leased – Re-Leased integrates with Xero to let users view their tenant data and financial accounts at all times. This eliminates double-handling, manual data entry and headaches at tax time.

Tax Agility has worked with Xero since 2011 as gold partners and certified Xero advisers. This means that our clients get exclusive access to a whole host of benefits, including 25% discounts on Xero subscriptions. In addition, as experts in Xero, Tax Agility can help make your transition to ‘Making Tax Digital’ as smooth as possible. Take advantage of the free 30-day trial and contact us today.

Get in touch with one of our specialist accountants for landlords today. Give us a call on 020 8108 0090 or send us a message via our Contact Form.