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Recent tax and regulatory changes have created some challenges for buy-to-let landlords. So, we wanted to pass on 4 things that have been highlighted to us to make sure you are aware of what’s to come in 2019 for buy-to-let landlords.

1. Mortgage interest tax relief

In the 2019/2020 tax year, landlords will only be able to offset 25% of their mortgage interest for tax purposes.  It is therefore important that landlords plan accordingly.

In the 2020/2021 tax year, all of a landlord’s gross rental income will be taxable.  Landlords will instead be given a reduction in their tax liability equivalent to 20% of their mortgage interest.

A number of landlords are considering transferring their portfolios to, or purchasing new properties through, a limited company structure.  If you are considering this approach, it is important that you consult a qualified tax accountant and seek independent legal advice.

2. Houses in Multiple Occupation (HMO)

There have been some recent changes in English law covering HMO’s around licencing requirements and new minimum room sizes.  Therefore, as an existing HMO landlord in England or if you are thinking of investing in an English HMO, you must seek legal advice and  be aware of this new legislation and how it may affect your investment.

English law currently differs in many respects from Scottish law regarding HMO’s.  However, it is anticipated that the recent changes in English law may soon apply in Scotland.  So, if you are considering investing in any HMO, please seek advice from your legal representative to ensure you are aware of the current legal position. 

3. Minimum Energy Efficiency Standards (MEES) and the Energy Performance Certificate (EPC)

MEES were introduced in April 2018 and initially affected all new lets and tenancy renewals.  From April 2020 the standards cover all existing tenancies.  In addition, Landlords must also ensure their properties have a minimum EPC rating of E (An EPC is valid for 10 Years).

It is illegal to rent a property failing to meet the minimum rating (unless there is an applicable exemption, e.g. being a listed building, holiday accommodation rented out for less than 4-months per year or let under licence to occupy).

Landlords will be unable to rent out properties until the works required to meet the minimum rating have been completed.  Fines for letting properties which fail to meet the standards can be up to £4,000.

4. Stamp duty

The Scottish Government announced that, from 25th January 2019, the Additional Dwelling Supplement (ADS) increases to 4% on purchases of most second properties.  For now, the ADS for the rest of the UK remains at 3%.

The ADS is paid when buying a second property worth £40,000 or more.  It’s the equivalent of the Stamp Duty Land Tax and paid on top of the standard Land and Buildings Transaction Tax.

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