Thu 21 Jul 2016 View all news articles

Taxes and the future of the private rental sector

Following the recent stamp duty increases for buy-to-let (BTL) properties and the proposed further tax hikes in the government’s latest Finance Bill, now is an opportune time for landlords to look to the future and plan their finances.

Daryl Tomlinson, NFoPP qualified branch manager of Karl Tatler Lettings’ West Kirby branch comments on the financial implications for landlords and tenants and how the rental market could react. Plus, what this means for the future of the sector, and recommendations how landlords could deal with the situation to protect their investments. 

Daryl says: “It’s clear to understand that landlords will naturally be concerned over the current and pending private rental sector conditions post Brexit. Combined with the intended further tax grabs for landlords, many may be left perhaps feeling that ‘uncertainty’ is the only certainty. 

“Our advice is simply not to panic, even with the mooted introduction of further tax introductions we have not seen any negative change in the rental market post referendum. Furthermore, I would expect to see the PRS thrive, and we are showing early signs of this already. 

“Introduction of the stamp duty changes back in April has seen little negative impact, with many savvy landlords purchasing at the lower end, where renewed stamp duty levels are relatively low, yet the yields are quite the opposite! With a housing shortage in the UK further financial implications geared at the PRS landlords are designed to boost the first time buyer market. Though this should not deter landlords. We have continued to register high numbers of applicants looking for new rentals and with 84% RLA members either having done so, or considering increasing rents, their yields will grow even stronger, combating any further tax grabs.

“It’s all about the ‘long game’ and not the ‘short game’. Further tax introductions would possibly be only a temporary measure and I would urge landlords to look at the bigger picture. For BTL landlords wanting to constantly achieve a maximum yield they should speak to their financial advisor and I would also suggest landlords not to enter long term contracts, avoiding those in excess of a year, keeping tenancies down to six or 12 months, allowing the flexibility of an implementing a rental increase if needed. With a huge disparity between the number of tenants and properties available, landlords will see maximum rental prices.

“Though with the private rental sector remaining strong in the wake of this year’s stamp duty change and the recent vote to leave the EU it’s been pretty much ‘business as usual’. And even with the proposed introduction of further tax grabs, with yields achievable of 10% plus, landlords should continue to seize the opportunities out there.”

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