A recent study reveals a notable surge in high-salary renters being required to provide guarantors – a shift in the rental market dynamics that property investors should be aware of.

The research, undertaken by Goodlord, scrutinised 783,000 tenant applications from January to September over four consecutive years (2020 to 2023).

Out of these, 138,949 tenants were asked to provide a guarantor. This analysis highlights an evolving pattern, particularly post-COVID, where the practice of requesting guarantors has not only persisted but expanded beyond traditional groups.

Key Findings from the Study

In 2020, 17.7 per cent of tenants were asked for a guarantor, which marginally rose to 18.4 per cent in 2023.

While guarantor requests for no-income tenants (usually students) remained stable, a remarkable increase is seen in higher income brackets.

Tenants earning £50,000-£74,999 experienced an 82.3 per cent hike in guarantor requests from 2020 to 2023.

For those earning between £75,000 and £99,999, the likelihood of being asked for a guarantor soared by 187 per cent in the same period.

Young renters under 30, forming over half of the renting population, are now eight per cent more likely to be asked for a guarantor, indicating a shift in landlord confidence regarding their ability to meet rental payments.

Contrastingly, requests for guarantors among renters over 60 declined by 10 per cent from 2020 to 2023.

Considerations for property investors

As property investors, it’s essential to understand these market trends and adapt your rental strategies accordingly.

The increasing guarantor requests for higher earners may indicate a more cautious approach to renting, despite tenants meeting affordability criteria.

For those advising or managing properties, it’s critical to balance the need for financial security with reasonable tenant requirements.

Staying informed about these evolving market dynamics will aid in making informed decisions and maintaining a successful investment portfolio in the property market.

If you require advice on managing the finances of your property portfolio, please speak to our team today.

Property investment can be as rewarding as it is complex, particularly when navigating the intricacies of its tax implications.

Understanding how to utilise tax deductions and allowances can significantly enhance the profitability of your property ventures.

First and foremost, let’s look at allowable expenses.

These are the costs incurred during the letting out of a property, which can be deducted from your rental income, thereby reducing your tax bill.

These expenses include, but are not limited to, property maintenance and repairs, utility bills, insurance and property management fees. Interest on property loans can be considered when calculating the overall tax liability.

It’s crucial to maintain detailed records of all such expenses, as they form the backbone of efficient tax planning, and you could claim back on these at a later date.

Another pivotal aspect of your tax planning strategy should be a firm understanding of capital allowances.

This often-overlooked area can yield significant tax savings, particularly if you own commercial property.

Capital allowances can be claimed on certain types of capital expenditure, providing a tax relief that reduces your taxable profit.

For those delving into business property development or renovation, it’s worth exploring the potential benefits of the Property Renovation Allowance.

This allowance can offer tax relief on properties that have been unoccupied for a period and then renovated for rental.

Furthermore, the advent of the Rent a Room Scheme presents an excellent opportunity for those with spare rooms in their property.

This scheme allows you to earn a certain amount of tax-free income from renting out furnished accommodation in your own home.

Finally, it’s essential to keep abreast of the changes in tax legislation.

Recent years have seen shifts such as the phasing out of mortgage interest relief, which impacts how property investors can claim tax relief on residential property finance costs.

In conclusion, property investment, while lucrative, requires a strategic approach to tax planning.

Engaging with an accountant who specialises in property tax can provide tailored advice, ensuring you navigate these waters with the utmost efficiency and legal compliance.

Remember, every pound saved in tax is an extra pound towards your investment returns.

For more tailored tax planning advice, please get in contact with one of our team.

The UK housing market has recently witnessed several significant shifts, particularly in the realms of property pricing and mortgage rates.

As we transition into the winter months of 2023, these changes offer both challenges and opportunities for buyers, sellers, and professionals within the property industry.

Trends in property prices

One of the most noticeable trends this season is the adjustment in asking prices.

After a period of heightened activity and increased prices, the market is now experiencing a correction.

The average asking price for a home in Great Britain has seen a notable decrease.

This downward trend in prices is particularly pronounced this November, surpassing the usual seasonal dip.

The market’s current average property value, which has decreased by 1.7 per cent from the previous month, reflects a more competitive environment among sellers.

This adjustment is a strategic move to attract buyers in a market that has shifted from its previous seller-centric orientation.

Impact of mortgage rates

Mortgage rates have been a critical variable affecting the housing market’s dynamics.

Following a spike in 2022, these rates have begun to stabilise, albeit at a higher level than in previous years.

The current rates, while lower than their peak, continue to influence buyer affordability.

This factor plays a significant role in how buyers approach the market, affecting their purchasing power and decision-making processes.

Regional variations in the market

The current changes in the housing market are not uniform across the country. Different regions are experiencing varying degrees of price adjustments.

In some northern areas of England, alongside Scotland and Wales, house prices have seen an increase compared to last year.

This regional disparity underscores the diverse economic conditions across the UK, each influencing the housing market in unique ways.

Looking Ahead

As we approach the end of 2023, the housing market is showing signs of settling into a new normal.

The balance between supply and demand is becoming more even, creating a more favourable environment for buyers.

With mortgage rates stabilising and inflation expected to decrease, there’s cautious optimism about the market’s trajectory.

The forthcoming Autumn Statement is also anticipated to play a crucial role in shaping the market’s future, potentially influencing policy, and buyer sentiment as we move into 2024.

Navigating the Market

For those looking to navigate the current housing market, whether buying, selling, or investing, it is essential to stay informed about these shifts.

Understanding regional trends, keeping an eye on mortgage rates, and seeking professional advice can help in making well-informed decisions in this evolving landscape.

In summary, the UK housing market is currently experiencing a period of adjustment, marked by decreased asking prices and stabilising mortgage rates.

These shifts offer a unique set of circumstances for market participants, underscoring the importance of staying adaptable and informed in this dynamic environment.

If you are looking for advice on residential property investments, please get in touch.

For many, investing in buy-to-let properties is a lucrative venture.

However, it’s crucial to understand the tax implications to maximise your returns and remain compliant with HM Revenue & Customs (HMRC) regulations.

This guide provides an overview of the essential aspects of buy-to-let taxation for landlords, covering income tax on rental earnings and potential deductions.

Income Tax on rental earnings

As a landlord, the income you earn from renting out property is subject to income tax. This income should be declared on your Self-assessment tax return.

The rate at which you’re taxed depends on your total taxable income – it could be 20 per cent, 40 per cent, or 45 per cent.

Remember, it’s not just the rent payments that count as income – other payments like charges for additional services (cleaning of communal areas, hot water, etc.) are also taxable.

Allowable expenses: Reducing your tax bill

Fortunately, there are several allowable expenses that landlords can deduct from their rental income before they calculate their tax liability.

These include:

• General maintenance and repairs: Costs incurred in maintaining the property, but not improvements (which could be claimed against Capital Gains Tax).
• Property insurance and service charges: Building and contents insurance, service charges for flats, and ground rent.
• Utility bills and Council Tax: If these are included in the rent you’re responsible for paying them.
• Letting agent fees and management costs: Charges for property management services.
• Legal fees for lets of a year or less: Costs for drawing up tenancy agreements, etc.
• Interest on property loans: Though the way this can be claimed has changed, you can still get relief on a portion of the mortgage interest.

Mortgage interest relief changes

One of the most significant changes in recent years is the reduction in mortgage interest relief.

Initially, landlords could deduct mortgage interest and other finance-related costs from their rental income before calculating their tax.

However, this has been replaced with a tax credit, worth 20 per cent of the interest costs.

Wear and tear allowance

Previously, landlords could claim a ‘wear and tear’ allowance for furnished properties.

This flat rate deduction has been scrapped.

Now, you can only deduct the actual costs of replacing furnishings in the property.

Understanding Capital Gains Tax (CGT)

When selling a buy-to-let property, you may be liable for CGT on any profit made.

The rate of CGT depends on your income and the size of your gain.

It’s important to keep records of your property’s purchase and sale prices, along with any associated costs (like legal fees and stamp duty) and improvements made.

Final thoughts

Navigating the tax landscape as a landlord can be complex, but understanding these essentials is crucial for effective property management and tax planning.

It’s always advisable to seek professional advice tailored to your specific circumstances, ensuring you are both compliant with tax laws and able to make the most of available deductions and reliefs.

Remember, effective tax planning can significantly impact the profitability of your buy-to-let investment.

If you are looking for advice on buy-to-let properties, please get in touch with one of our experts.

The recent surge in holiday lettings, reported by the BBC last year as a 40% increase in England over three years, has highlighted both the potential for significant income in this sector.

Unlike regulated hotels and B&Bs, short-term lets have remained largely unregulated, leading to concerns about their impact on communities and housing markets – but not for much longer.

Introducing the Levelling Up and Regeneration Act

The Levelling Up and Regeneration Act, which received Royal Assent on 26th October 2023, introduces a key change with Section 228.

Set to be enforced from 26th December 2023 onwards, this section mandates a licensing scheme for short-term lets, including holiday cottages and self-catering apartments.

The goal is to uphold standards and mitigate negative impacts on communities and housing markets.

Providers of these lets will now need to ensure their accommodations meet minimum quality and safety standards.

Exploring the Proposed Licensing Scheme

The Department of Culture, Media and Sport’s consultation, which concluded last month, presented three options for the licensing scheme:

1. Local Authority Opt-In/Opt-Out: Similar to the Home in Multiple Occupation license, local authorities can choose to participate or not.
2. Local Authority-Run Licensing: This would eventually become mandatory for all short-term holiday lets.
3. Mandatory National Scheme: Administered by the English Tourist Board.

Options one and two might create a varied landscape, with different requirements per local authority, potentially leading to administrative burdens for hosts, especially those with extensive portfolios.

The final legislative details, including the specifics of registration and renewal processes, are still pending clarification, despite their impending introduction.

Non-compliance with the new regulations could lead to substantial penalties, including fines, remedial orders for unsafe properties, and potentially a ban from letting.

An indirect enforcement mechanism might also emerge, where rental platforms require compliance documentation before allowing listings.

Time to act

For landlords and property investors, this Act signals a significant shift. Staying informed about the developing regulatory landscape is crucial.

It is advisable to begin preparing for these changes by reviewing the quality and safety standards of your properties and understanding the potential implications of the different licensing options.

As always, compliance is key to ensuring a successful and legally sound investment in the dynamic short-term and holiday letting market.

For advice on this and other issues related to property investment, please get in touch with specialist property accountants and advisers.

The property landscape is teeming with opportunities for investors. Potential growth areas are abundant in the market if you know where to look.

This article will explore the five important elements in identifying promising investments in the residential property market.

Five tips for investing in property

• Research: The most vital element when investing in property markets. Your research should include property values, rental yields, occupancy rates, and market trends in the area.
• Work out your goals: Defining your investment strategy will guide you to the property best suited to your needs. You’ll need to work out whether your strategy is the pursuit of long-term appreciation or short-term gains.
• Stick to your budget: Avoid the temptation to over-invest. Remember that there are risks involved in any property investment so start small and stick to the budget you know you can afford.
• Plan your strategy: There is a big difference between buy-to-let and buy-to-sell investments. Knowing your strategy before getting stuck in can keep you on the straight and narrow during your investments.
• Seek professional help: Seek professional advice to help you understand the local economic and political landscape. An expert accountant can help you organise your finances to ensure you are in the best position to invest.

Investing in property presents an exciting opportunity for those looking to expand their wealth through real estate.

In the ever-evolving landscape of the property market, staying informed and adapting to market trends is vital.

Speaking to an experienced accountant can save you money and time in your investment journey whilst protecting you from potential pitfalls.

To find out more about our property services, get in touch with one of our expert team.

There are several different types of commercial leases, each having its unique financial implications.

Understanding the differences is crucial to selecting the best one for your business.

• Gross leases include most costs like taxes, insurance, and maintenance within the rent. They offer more predictable monthly expenses but may come with a higher upfront cost.
• Net leases require the tenant to pay some or all the property-related expenses. These offer lower rent but add complexity in budgeting and financial planning.
• Percentage leases involve paying a base rent plus a percentage of sales. These are suitable for retail businesses but require careful consideration of the financial model and whether the business will make enough sales for you to profit.

The flexibility to negotiate terms can allow you to alter a lease to suit your business needs. Including the duration of the lease, the existence of regular rent reviews, break clauses, and outlining your responsibilities for repairs and improvements.

Different leases may also offer tax benefits or obligations. For example, the ability to deduct rent as a business expense can be a significant advantage for small businesses.

We can provide tailored support to help you make informed decisions that enhance your portfolio’s success. Get in touch to find out more.

The success of your property investment relies on your ability to recognise good locations.

Below are the essential questions you should ask yourself about any property location before you invest your money.

• Economic factors: Is the area growing in economic prosperity?
• Infrastructure: Are there good transport links connecting your property to nearby important places?
• Supply and demand: Is your property being devalued by the availability of other investment options?
• Historical performance: Has the area had consistent growth over a long period?
• Environmental considerations: Is the property at risk of flooding, near hazardous or unsightly materials (recycling centres, etc.), or in a wildlife protection zone?

An accountant cannot perform location analysis for you, but they can make the rest of the property investment process easy, simple, and effective.

Professional guidance from an accountant

Location analysis is a multifaceted process that requires a methodical and well-informed approach. Whilst you work on that, your accountant could be working on making the rest of the investment process smooth and simple.

An accountant can advise you on cash flow management and financial modelling so that you stay on top of your investments and have a successful portfolio.

In addition, your accountant can produce accountants reports that outline your financial well-being to a mortgage lender.

They can also work closely with your other advisors, like your estate agent, to streamline the buying and selling experience.

By seeking professional guidance from an accountant, you can make well-informed investment decisions and ensure that your property has a positive impact on your finances long-term.

Feel free to reach out to our experienced team for advice tailored to your specific investment needs and objectives.