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We will fight them on the beaches: addressing the ‘unforeseen’ consequences of the Budget

Fight them on the beachesWe will fight them on the beaches: addressing the ‘unforeseen’ consequences of the Budget

Further to our work mentioned in our previous blog on the issue, the NLA has continued work lobbying on the Budget to address the ‘unforeseen’ consequences, with the loss of mortgage interest tax relief being the major focus of the policy team since July.

There are small signs that politicians are waking up to the unexpected repercussions of these proposals. The trouble is some are doing it (probably on recliners) on various beaches across the UK, as Parliament is now in recess for the Party Conference season, meaning MPs decamping to Brighton, Bournemouth and other warmer climates for three weeks.

We intend to fight them on the beaches and we need your help

  1. Use NLA Lobby today and email your MP to tell them of the changes. This is especially important if your local MP is one of the Committee members on the Finance Bill, or you have property in their constituencies.

We’ve had hundreds of members lobbying their MPs so far with numerous MPs describing our briefing as ‘excellent’ and ‘top notch’.

  1. Tell us your views by filling out this anonymous survey.

The information we get from surveys such as these has already proved invaluable, and thanks to those of you who have completed them before, we can tell MPs the following:

  • Currently, there are more than 204,000 private landlords who have BTL mortgages and are liable to pay higher rate Income Tax.
  • Only 1 in 10 private landlords hold their properties in the form of a limited company.
  • The Chancellor’s Summer Budget may push more than 136,000 private landlords with modest incomes into a higher Income Tax Band.  

This latest survey includes questions which will give us more ammunition for the battles ahead.

Work, work, work

Before MPs went off on jolly holidays recess, the Finance Bill had reached Committee Stage. The tax relief proposals (or as they are more legalistically known Clause 24  relief for finance costs related to residential property businesses)  are due to be debated on Tuesday 13 October, the day after Parliament returns.

This is MPs’ second holiday recess since the Budget, but we have been lobbying hard behind the scenes non-stop.  We have been getting traction when we highlighted the ‘unforeseen circumstances’ of the changes that mean a large number of lower income taxpayers will be inadvertently moved into the higher bracket, people losing their benefits or personal tax allowance, and in some cases their whole livelihoods as previous profitable portfolios face making a sizeable loss based on non-existent gross profits.

The Treasury meanwhile are either unwilling or unable to answer parliamentary written questions the NLA have tabled about the ‘unforeseen effects’ of the Budget.  You can see our questions and the Minister replies here and here.

If only they had consulted us we could have told them. We have circulated the handy infographic below to MPs showing what the current proposals would mean, as well as distributed a detailed briefing paper to MPs on the Bill Committee, which you can read here.

Landlord tax change implications graphic

In short there is a lot going on, but much of it inevitably has to be behind the scenes.  We appreciate this is frustrating to people who want to see and hear what we are doing, but it is often counterproductive to give a running commentary of our lobbying efforts in the media. Put it this way, if you were an MP looking to amend the Budget of the Chancellor, First Secretary of State and heir apparent to the Prime Minister, would you appreciate discretion, or your name being brandished about in the media by the very people you are trying to help?

What else is on the agenda?

Looking longer term there is much more sympathy amongst MPs for landlords in regards to Capital Gains Tax, which is seen as ripe for reform.  This is a longer term policy objective of the NLA’s so that landlords are not taxed twice if they use the capital gain to reinvest in the portfolio (good business sense in most cases) and then are forced to sell later on. We fear this will be another ‘unforeseen’ consequence of the budget and we have a meeting scheduled next month with the Treasury to discuss our proposals.

MPs are also keen to support our calls for increasing choice for landlords as to how they run their businesses and whether to incorporate. We have highlighted the barriers to incorporation that landlords face, and are calling for a temporary exemption for landlords.

In the meantime we need your help to ensure that MPs get lots of holiday beach conference season reading. Use NLA Lobby to email your MPs and fill out our survey here. To coin another famous Churchill phrase ‘Action This Day’.

Meanwhile we will keep you updated on our progress as we fight the good fight.

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Five things to be aware of as a landlord

5 tipsThere is so much more to being a landlord than just purchasing a property and finding tenants that it is near impossible to name just five things to look out for. Being a landlord means that you are running a business and for it to be a success it must be treated as such.  This includes complying with the many, ever-changing laws and regulations which govern the sector.

To avoid getting into trouble here are 5 things a landlord should know:

  1. Tenancy agreement

It is vital that you provide your tenants with a comprehensive tenancy agreement which is robust and up to date.  A tenancy agreement sets out the terms of the tenancy and includes important details of each party’s responsibilities in a clear, concise and transparent way. The tenancy agreement may also be called upon should a dispute arise at the end of the tenancy. It is therefore vital that the agreement covers every aspect of the tenancy.

  1. Documentation

At the start of a new tenancy, the landlord should provide a tenant with certain documents. If you don’t, you could be in breach of the law, and may run into difficulties if you need to regain possession of your property.  From 1 October 2015, the Government will require a landlord to provide their tenants with the following documentation:

  • A valid Energy Performance Certificate.
  • An annual Gas Safety Certificate. Each gas appliance must be checked and certified each year.
  • A copy of the Department’s ‘How to rent’ Guide. This guide is accessible for free on the Department’s website:
  • Relevant tenancy deposit protection information.
  1. Deposit protection

If you take a deposit, it is the law to that it must be protected in a Government-approved scheme such as my|deposits.  A landlord in England and Wales (other rules apply to Scotland and NI) must protect the deposit within 30 days of receiving the deposit and provide the tenant with the prescribed information within those 30 days.

  1. Protect yourself and know the law

As a landlord, you need to protect yourself; that includes conducting a thorough tenant check and having appropriate landlord insurance.

You also have a responsibility to your tenants and you must ensure that you know what they are and follow them. This will ensure the safety of your tenant and keep your property in good nick.

As well as providing a safe environment for your tenant, you must also be aware of a wide range of other responsibilities. For example, is your property in an area where the local authority requires landlords to be licensed, and if so, do you have a licence for the property?  If you don’t, you will be breaking the law and could end up with a hefty fine.

  1. Information

Having readily available advice and support can mean all the difference.  Joining a landlord association such as the NLA will provide you with help, advice and support to ensure the smooth running of your letting business. The NLA has a comprehensive online library and an advice line. The NLA also offers training for new and existing landlords to ensure you develop your professional skills and are up to date with any new changes.

Most calls to our advice line have been because a landlord has an issue which arose because they were unaware of the rules and their responsibilities. Getting into trouble like this is stressful and sometimes ends up being very costly.

More than anything else, do your research before embarking on the landlord journey.


Do you know how to calculate your rental yield?

how to calculate rental yeildsWorryingly over a quarter of landlords say they do not know what their rental yield is; furthermore one in 10 claim not to know how to calculate their yield at all*.

With the average net rental yield at 5.9 per cent any small changes to your profit margins could have dire consequences for your letting business. Being able to calculate how market variations – such as the Chancellor’s recent announcement on mortgage interest or impending interest rates rise –will impact your business is essential in being able to address issue before they become a financial burden.

How do you calculate a yield?

There are three main ways to calculate a rental yield:

  1. Gross yield
  2. Net yields
  3. Yield actual investment to date

Whichever method you choose is fine as long as any future comparisons are made like for like.

So for those who aren’t sure what to include or how to go about it the NLA has put together a simple guide to get you started.

Gross yields

What it’s for?

Gross yield is used to identify the yield of your investment before any outgoings such as tax and insurance.

How to calculate

Your gross yield is the income generated by the investment, before expenses are deducted, divided by the value of the investment.

Gross yield = (Annual gross rental income) / (value) x 100

What is considered as value?

Value can either be a property’s market value or the purchase price. You can use both but you will get a more realistic figure if you use market value when calculating your gross yield as it will take into account the value of the pound and any variation to the property value.

Net yields

What it’s for?

A property may have a high gross rental yield but the rental return may be low when expenses are accounted for. For this reason, net yield is a better measure than gross yield when assessing returns.

The net yield helps you get a picture of how your books are balanced and whether it will is a viable letting business.

How to calculate

To calculate your net yield you subtract all expenses, including stamp duty and taxes.

Net yield = (Annual rental income – Annual expenses) / (value) x 100

Yield on actual investment to date

What it’s for?

And finally, you’ll need to calculate your yield on actual investment to date. This gives you an idea of how the investment has performed since purchase.

How to calculate

This compares your income against ALL costs incurred by the investment, including the deposit and any capital repayments.

Yield actual investment to date = (Annual rental income –Annual expenses / actual expenditure (incl.  Stamp Duty and Deposit) x 100

Work out your yield using our online calculator

The NLA provides a handy online calculator to help you calculate your rental yields and find out how your investments are performing. You can give them a go here.


Once the Chancellor’s proposed changes to mortgage interest tax relief comes into force, in 2017, you will have to adjust your calculations. To get an idea of how the changes will affect you try our loan interest calculator.

The information provided is this blog is indicative of a basic approach to yield calculation, which may be useful to landlords interested in appraising their performance. The NLA Accepts no liability for user error or the accuracy of data used to calculate yields using the information provided.

*NLA Quarterly Landlord Research Panel – Q2 2015 (977 respondents)

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Don’t be a victim of fraud: Protect yourself from rental scams

rental fraudAnother year, another group of victims of rental fraud; sadly it is that time of the year again where many have their excitement of coming to the UK to study or work turned into stomach-churning dread at the realisation of having been scammed at the hands of fraudsters when searching for a place to live.

Each year we receive reports of students being tricked out of their rent and deposits by criminals when looking on the internet for property to rent. Some have paid hundreds, sometimes thousand for accommodation which either doesn’t exist or does but doesn’t belong to the person you gave your money to.

Rental fraud happens when would-be tenants are tricked into paying an advance fee to rent a property. The victim loses the fee they have paid and is not able to rent the property they thought they had paid for in advance. It is well known that scammers often target students who are looking for university accommodation, particularly those coming from abroad securing property online, and use tactics such as NLA branding or fake letters from NLA Local Representatives to support their demands in order to lure their victims in to a false sense of security.

Tips to avoid being scammed

The National Landlords Association (NLA) is warning students and other would be victims to beware of rental fraud. We, in partnership with National Union of Students (NUS) and National Crime Agency, came up with some top tips which can help anyone who is not familiar with the rental market in the UK.

Never take things for face value, make sure you have your wits about you, and if your gut is telling you something, listen to it.

Here are our top tips to ensure you can protect yourself from scams:

  • Overseas applicants needing to secure accommodation before they arrive in the UK should first seek the help of the employer or university they are coming to as they will have an approved list of trusted accommodation providers.
  • Do not send money in advance or upfront to anyone advertising rental properties online until you are certain the advertiser is genuine and have viewed the property
  • Beware if you are asked to wire any money via a money transfer service. Criminals can use details from the receipt to withdraw money from another location.
  • Get paperwork. Ask for a copy of the tenancy agreement or safety certificates to confirm that the “landlord” has a genuine legal connection with property.
  • Contact the organisations the landlord says they are associated with to verify their status. Tenants wanting to check whether a prospective landlord is a member of the NLA or accredited should ask them for their membership number, then go to:
  • Use government approved deposit schemes such as my|deposits
  • DO NOT be pressurised into transferring money. Transfer funds to a bank account after you have obtained the details by contacting the landlord or agent directly, but only after the above steps have been followed.
  • Remember, if the offer is too good to be true, it probably is! Use your common sense.

Remember to report it

Finally, any tenants who fall victim to such a scam should contact the relevant authorities in their own country and alert the police in the UK via


May you live in interesting times…..

interest-rateIn February 2009 Gordon Brown was Prime Minister, Alistair Darling was Chancellor of the Exchequer and Mervyn King was Governor of the Bank of England.

Perhaps more significantly, the Bank of England Base Rate was 1 per cent. The following month it was to drop to 0.5 per cent a historic low at which it has stayed for more than 5 years.

In that time the private-rented sector has grown from around 14 per cent of households to more than 1 in 5, thanks in part to billions of pounds worth of buy-to-let lending.

Many landlords have become accustomed to low interest rates, in fact a significant number have never known base rates above 0.5 per cent, and it looks like rises predicted for late 2015 may come as an unwelcome surprise for some.

The calculator below will give an indication of what mortgage interest payment may look like – assuming lenders pass on future increases in full. Simply input your outstanding mortgage amount and current product rate (replacing the green examples) for an indication of the costs of rising rates.

Given the Government’s plans to drastically reduce the ability of landlords to deduct mortgage interest from their taxable income, landlords’ ability to cope with increased rates is likely to be a defining feature of the next few years. Although most predictions suggest that the base rate will increase very slowly – not reaching 3 per cent until around 2017/18.


It was better when they forgot all about the PRS

budget announcement falloutFor some people, (teachers and dare I say Tube staff)[1] the summer months are a time of winding down at work, quiet relaxation and holidays with family and/or friends. For the policy team at the NLA however, the last few months have been very eventful.

What are we playing at?

No we haven’t been gripped by Corbyn fever (we will save debates about rent controls and renters having a right to buy for another time) but instead inundated with new government policies on the PRS and correspondence from members asking what the NLA ‘is playing at’ and what we intend to do about the Chancellor’s tax bombshell.

We always welcome interaction with members, and we plan to use many of the examples of the impact on their personal finances they have sent us in our representations to the Treasury. However we might not take up some of the more radical suggestions of lobbying tactics, my favourite of which was that the UK’s leading membership organisation for landlords should never speak to the Government again on any issue concerning landlords until they capitulate.

That is because as well as the fallout from the Budget in the last few weeks we have had announcements on Right to Rent immigration checks, the consultation to replace the Wear and Tear Allowance, and a consultation (sorry, technical discussion paper – which just means we have less time to respond) from the DCLG on ‘Tackling Rogue Landlords and Improving the PRS’. All this from the party we criticised before the election for forgetting to mention the PRS at all in their manifesto.

We saw it coming

Members might be interested in our correspondence with the Treasury. We wrote to the Chancellor before and after the Budget, and the content of the response, from David Gauke MP, isn’t encouraging. In fact, the Minister at one point worryingly seems to think we should be pleased with the Budget in that they didn’t abolish mortgage interest tax relief all-together.

As well as displaying (what we hope is just) a poor sense of humour, he also shows a worrying lack of understanding of the PRS. Firstly he says that: “The Government does not expect this to have a large impact on either house prices or rent levels…”

Err…how do you think landlords are going to afford this massive tax hike? As with any other business, they will absorb what they can, but they will have no choice but to raise more revenue from their customers to cover the shortfall, i.e. raise rents.

The Minister then says that, “Only around 1 in 5 (18 per cent) of individual landlords are expected to pay more taxes.”

What the Minister does not mention is that:

  1. A large proportion of those 18 per cent are likely to own more than one property, hence face a massive tax hike.
  2. This move will take more landlords into the higher tax bracket.

The NLA agrees with the Minister that there should be a fair tax system. To that end we think that landlords should be treated on the same footing as comparable businesses and only be taxed on their profit, rather than the costs they incur as a result of making it their business to provide homes for people in the middle of a housing crisis.

Not shouting from the rooftops

We recognise that the loss of tax relief is a very important issue for members, and one that goes straight to the very viability of their business. Notwithstanding the other policy initiatives, it has been the major focus of the policy team for the past six weeks, and will continue to be.  There is a lot going on, but unlike some other campaign organisations, the NLA finds it is often counterproductive to give a running commentary of our lobbying efforts.

The NLA is of course meeting both HMRC and Treasury officials to make clear our opposition to the restricting of finance cost reliefs and talk through the ramifications of the policy as it stands, and to mitigate its effects on landlords. This is an NLA briefing paper we provided the Treasury ahead of our meeting.

We have also met with mortgage lenders about its effects on their stress testing and borrowing restrictions, and set up meetings with prominent MPs when the Commons comes back from Recess.

We will, as ever, keep members advised (that is if we haven’t been successful in applying to be a teacher / tube driver).

[1] Legal disclaimer: that was a joke – teachers and Tube staff both have very demanding jobs and deserve their holidays / rights in the workplace.   


Top five reasons for choosing a lender

top 5 reasons for choosing a lenderWhen it comes to finances it can be daunting to work out which lender you should put your faith in to ensure you get the best value for money and that all your needs are covered.

With so many buy-to-let (BTL) mortgage products to choose from, where do you start? Our latest research* looks at the top five reasons why landlords choose to use a particular lender.

5.   It’s all about the money

At the lower end of the scale, but still important, 20 per cent chose their lender because they offered the lowest arrangement or product fee. Good financial planning can mean the difference between a successful letting business and financial difficulty, so being prudent from the beginning is a good place to start.

4.   I can give you what you want

Nearly a quarter (24 per cent) of landlords were swayed by the specific criteria used by their current lender.  Landlords have specific requirements, and it’s no wonder that this makes it into the top five when almost six in ten (58 per cent) landlords say that lenders don’t consider their individual circumstances.

3.   Déjà vu

Whether it is because they have a bank account or previous residential or BTL mortgages, an existing relationship is enough for 25 per cent of landlords to go back to a lender they’ve used before. Landlords seem to be creatures of habit when it comes to choosing a lender and it just goes to show that good service breeds repeat business.

2.   Get low

Nearly a third (31 per cent) chose their lender because it offered the lowest interest rate, which when doing overall calculations including fees and other costs, is high up on the list of top five reasons and is one of the most important aspects when sourcing new loans. But it doesn’t make the number one spot…

1.   Somebody told me

… The top reason cited by landlords when choosing a lender – at 42 per cent – is because they were advised by an intermediary.  It is not surprising to see so many landlords using a particular lender for this reason when previous NLA research shows that as many as seven in 10 say they rely on brokers or intermediaries to find them the best deal.

Have you got the lender know how?

It is plain to see that value for money and an existing relationship is what most landlords rely on when choosing a lender.

If you don’t trust yourself to make an informed decision then using a broker or intermediary is good way to start. However if you like to do the legwork yourself make sure you check out the deals offered by NLA Mortgages. NLA Mortgages provides a free online buy-to-let mortgage search facility to help you find the best suited product for you, sourcing from over 600 mortgage products including offers that are not available in the general marketplace.

*NLA Quarterly Landlords Panel research – Q1 2015 (1,070 respondents)


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