More in this section

Over the past few years there have been several changes in UK legislation and regulation for landlords and mortgage lenders. There are a number of things to consider, whether you’re thinking of becoming a landlord or thinking of expanding your portfolio of properties.

Responsibilities of a landlord
Being a landlord isn’t just a case of renting out a property you own. There are certain things defined by legislation that you must follow. Examples are:

  • Annual gas safety inspection
  • Energy Performance Certificate
  • Property and landlord insurance
  • Liability insurance

There are also some other responsibilities it’s worth keeping in mind:

  • Repair and maintenance of the property, whether furnished or not
  • Collecting rent
  • Specific requirements on how deposits are held
  • Scheduling regular inspections
  • Whether you manage the letting yourself or get a letting agent to do that for you
  • Referencing new tenants
  • Having an up-to-date tenancy agreement

Find out more about landlord responsibilities on the Government website.

Stamp Duty Land Tax (SDLT)
SDLT is a tax you have to pay when you purchase a property. The amount you have to pay depends on the value of the property you are purchasing. Since April 2016 any property you purchase that will be a rental property (you’re buying to let) or will be a second home is subject to an additional 3% tax on top of the standard SDLT scale.

Purchase price of property Rate of Stamp Duty Buy to Let /
Second home rate*
 

£0 - £125,000

0% 

3%

£125,001 - £250,000

2%

5%

£250,001 - £925,000

5%

8%

£925,001 - £1.5 million

10%

13%

Over £1.5 million

12%

15%


*Properties under £40,000 are not subject to second home SDLT

The additional 3% applies if you are buying a property with the purpose of renting, even if you don’t own your own home and rent yourself. It also applies if you own a home in your name but your spouse doesn’t, because you are considered to be one “unit”, which prevents people trying to avoid paying the additional tax.

Some actual examples of tax you may need to pay with the additional 3%:

Purchase price of property Stamp Duty to pay 
£120,000

£3,600

£240,000

£9,500

£350,000

£18,000

£500,000

£30,000

£1 million

£73,750

Income tax
As a landlord, you have to declare your income and costs, even if you aren’t making a profit. To do this, you should keep all records, invoices, receipts and statements for up to six years.

If you own any rental properties on a personal basis you may have to pay income tax, and likewise if you own any properties as a limited company you may have to pay corporation tax. The amount of tax you have to pay depends on several different factors, including the rental income, mortgage interest and any other deductible costs.
 
Before April 2017 you were able to get tax relief on any interest paid on the mortgage in bands up to 100% for the highest tax rate. However, changes to legislation now mean that between April 2017 and 2020 the tax relief you will get will change if you own Buy to Let properties on an personal basis.

This means that if you are a higher, or upper, rate tax payer, you may have a larger tax income liability. If you are a basic rate tax payer your income tax liability may be affected if your total income from earnings and rent is above a higher rate threshold.

If you’re not sure on how the changes may affect how much tax you have to pay it may be worth speaking with a tax adviser. You can find one in your local area on unbiased.co.uk

Buy to Let in your own name or as a Limited Company?

In the last couple of years owning Buy to Let properties within a Limited Company has become more common. There are advantages and disadvantages to doing this, and it’s worth getting both financial and legal advice before you make a decision.

If you’re thinking about buying or transferring properties into a Limited Company you may need to consider the following implications:

• Capital Gains Tax
• Stamp duty land tax (SDLT)/land and buildings transaction tax
• Inheritance tax
• Income tax and corporation tax
• Annual Tax on Enveloped Dwellings (ATED)

It is important to keep in mind that if you decide to own your currently rented properties in a Limited Company you may face a capital gains tax charge of up to 28% of the property’s market value. You may also face an additional SDLT charge for the transfer. 

We offer Buy to Let mortgages in your personal name and also as a Limited Company.

We also offer a Buy to Let Offset Mortgage. By offsetting your savings against the mortgage you will reduce the amount of interest that is charged. Other things being equal this increases your net profit from letting (the tax charged on this higher figure will be more as a result) and the offsetting increases the overall cashflow you receive from letting.

It’s worth speaking with a qualified mortgage adviser to discuss your options and see which one may be best for your circumstances.

Find out more about our range of Buy to Let mortgages.

Family Building Society
Ebbisham House
30 Church Street
Epsom
Surrey KT17 4NL
Follow Us