Recovery Team Scaling up at RMT Accountants
March 11, 2019
New government plans to force landlords to make energy efficiency improvements to their buy-to-let properties could be the costly final straw that makes some consider giving it all up.
That’s the response of Rachel Warriner, corporate tax manager at Gosforth-based RMT Accountants & Business Advisors, to plans to make it compulsory for let properties to have at least a Band E energy efficiency rating.
With many Victorian and Edwardian properties falling into the lower Bands F and G, extensive and expensive work is likely to be required to bring them up to scratch, including boiler replacements, insulation and cavity wall filling.
The Government has proposed a ‘hypothetical’ £5,000 spending cap on making the required improvements while suggesting that most landlords will have to pay no more than £1,800 to meet the new standards.
But adding these additional cost to other revenue-raising measures that the government has imposed on the buy-to-let sector could convince some landlords that it’s no longer a viable option for them to follow, especially for those who have bought property to provide a secondary income.
In April this year, a three per cent surcharge was added to Stamp Duty Land Tax on purchases of additional residential properties, while the automatic ‘wear and tear’ allowance on furnished accommodation has also now been removed and mortgage interest relief will be restricted to the basic rate for buy-to-let landlords from next year.
Until recently, landlord could apply for loans from the Green Deal scheme for improvements, which are then repaid by tenants who benefit from lower bills, but the government is now proposing that owners provide the money upfront themselves.
Rachel Warriner says: “If you’re a buy-to-let landlord, it seems the government really has had it in for you in the last couple of years, and these latest measures show that it is continuing to target the sector for what basically appear to be revenue-raising reasons.
“The buy-to-let market has thrived in the North East over the last couple of years, and there is clearly still a real demand for rented property in the region, which has encouraged new entrants to the market who are looking to make small long-term investments to help secure their financial futures.
“The government has suggested that landlords can meet the additional costs they’re imposing by borrowing more, but they could in fact prove to be a real tipping point for some new arrivals in the sector who can’t access the lump sums required and who may not have fully realised the work required in managing cost and tax-related issues on their properties.
“There are still returns to be made from the North East buy to let sector, but landlords need to have property management strategies worked out very carefully and must ensure that the monthly financial sums add up for them if they’re to get the returns they’re looking for.”