The changes to the lettings industry in 2016
While 2016 was a year of high demand for rental property; there were many changing and disruptive elements throughout the course of the year. There is still a lot to be said for acting as a landlord but it is important that professionals are aware of the changes to the lettings industry in 2016.
The Right To Rent Scheme
While this scheme had been trialled in certain parts of the country in 2015, the start of 2016 saw it rolled out across the country. Landlords were required to ensure that their tenants had the right to live in the United Kingdom. A landlord was required to ask for documents that proved the tenant met the requirement of the Immigration Act of 2014. A failure to act in this manner could see a landlord face a fine of up to £3,000 for every individual or tenant that was ineligible to remain in the UK.
EPC legislation changes
One change that has had an impact on landlords is that they were not able to refuse a tenant request for energy efficient upgrades if a valid or reasonable excuse was not available. Landlords should look to make their home as energy efficient as possible but some landlords prefer to hold off from making these changes, but this new regulation changes this.
From April 2016, the Dividend Allowance came into effect, replacing the Dividend Tax Credit. Whatever non-dividend income is earned by a landlord, they now don’t have to pay on the first £5,000 of dividend income.
Tax is now paid on sums of over £5,000 in the following manner:
• 7.5% is paid on dividend income found in the basic rate of taxation
• 32.5% is paid on dividend income found in the higher rate of taxation
• 38.1% is paid on dividend income found in the additional rate of taxation
Wear and tear allowance
It used to be that landlords could claim for wear and tear on their furnishings every year. This system has changed and landlords are now only able to claim tax relief when replacement furniture has been purchased.
Stamp duty changes
One of the biggest changes in the letting industry in 2016 revolved around the changes to stamp duty. As of April 2016, anyone buying an additional property had to pay an additional 3% in stamp duty for all purchases of over £40,000. This led to an increase in property purchases in Q1 of 2016, as investors and landlords sought to expand their portfolio at a lower price and then a fall in Q2 as deals had been concluded and people didn’t want to pay the additional charges.
Energy efficiency changes
It was announced that as of April of 2018, rental properties should hold an EPC rating of at least of E. Any landlord found to be in breach of this regulation can face a fine of up to £4,000. While this change doesn’t occur until next year, many landlords are now taking action to ensure that they comply by the time the regulation comes into force.
2016 was an eventful one in the UK property market and the rental market was also impacted on with a number of key changes.