Welcome to the Wood & Pilcher November newsletter! In this edition; New tax rules to force many landlords into higher tax bracket, UK homeowners are confident about house prices post-Brexit, why property has been the best investment of the last decade and finally, six ways to use your loft!  

Until next time,
Wood & Pilcher

 Under the new rules that will come into force from April 2017, an estimated 440,000 buy-to-let landlords, who currently pay income tax at the basic rate of 20% will be pushed into the higher bracket of 40%.

Current regulations allow landlords to offset their mortgage interest against income tax. This means that a basic rate taxpayer would receive a 20% tax relief, those at a higher rate would receive 40% relief and top-rate taxpayers could claim 45%.

Last year the government announced that from April 2017 landlords will no longer be able to offset mortgage interest against their tax bill. Meaning tax relief will be at a flat rate of 20%, effectively halving the relief and reduce profits for landlords paying above basic rate taxes.
This change is part of a 3-year plan to phase out the current regulations and will result in landlords paying tax on their rental revenue and not just their profit, from the start of 2020.

Research from the National Landlords Association (NLA) has estimated close to half a million landlords could be affected by the new rules, with the average UK landlord owning a single property having to pay an extra &3,600 in tax.

The recent research has also shown the effects of this change by region showing central London feeling the affect the most, with approximately 31% of its landlords being pushed into a higher tax bracket and the East of England (30%) and the West Midlands (28%) not far behind.

NLA Chief Executive, Richard Lambert believes the government have underestimated the effects of this change, stating “When the Government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh.”

This news won’t be welcomed by landlords as they’ve already had to deal with the blow caused by the increase in stamp duty and the changes to wear and tear tax.

Lambert went on to say that these rules should only apply those taking out a buy-to-let loan after the new rules are in place, Lambert said “Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home”

While it originally seemed to be all doom and gloom for the property market after Britain voted to leave the EU, recent research has revealed a much more positive outlook on house prices and the number of people interested in buying a home.

A recent study from estate agents Knight Frank revealed a “significant uptick in sentiment since the vote to leave the EU…” with results showing a fall in the number of homeowners who expect the value of their properties to drop.

The recent survey collected responses from 1,500 homes across the UK and found that only 12% of respondents expected their property's value to fall, an interesting statistic that was almost double when recorded in July at 23%.

According to the latest House Price Sentiment Index from Knight Frank just over 18% of those surveyed expected property prices to rise, a much improved statistic when compared to the 11.2% of July 2016.

Another sign of increasing optimism amongst homeowners, was the slight increase in the percentage of respondents interested in buying a home within the next 12 months, a number which rose from 4.6% to 6% over the course of the last year.

According to Senior Economist of the market analysts IHS Markit, Tim Moore “The key message is that UK housing market sentiment has recovered strongly this autumn from the post-referendum jitters seen during the summer.”

“There were signs of resilience across all UK regions, with households in the south of England most confident that property values will rise over the next 12 months.”

A second survey was conducted by property website Zoopla showing similar results and looked into responses from different regions in the UK.

Zoopla’s survey showed 73% of respondents believe the property values in their area will continue to increase with homeowners in the East of England and the Midlands showing the most confident, while those in Scotland and the North East appearing the most cautious, with only 60% of homeowners showing optimism on price rises.

Lawrence Hall, of Zoopla commented on the recent statistics stating that “Despite the political and economic uncertainty that Britain has faced over the last six months, it is reassuring that homeowners remain largely confident in the resilience and continued growth of the property market.

“Though anticipated growth rates may have slowed slightly, it’s encouraging that more homeowners are planning to buy or sell over the next six months and feel more able to achieve a mortgage approval than they did back in April.”

Since the financial crisis in 2008 the economy seems to have been in a constant state of uncertainty, leaving many questioning where exactly is the best place to invest their money.

There are plenty of options from the stock market to savings accounts, but what may surprise some is that findings from a recent study have shown property to bring the biggest return on investment over the last 10 years.

A recent study from estate agents Romans and Leaders has shown property to be the best investment option by some margin, by carrying out a comparison between the four most popular investment options, which are savings accounts, FTSE 100, property and gold.

This research looked into how much return you would see from an investment of &50,000 in 2006 into each of these investment options. The results showed property at the top of the table by some distance. An investment in FTSE 100 would have seen a profit of &3,000, a savings account would bring in roughly &15,000 of profit and an investment in gold would fetch an extra &50,000 across the 10 years. While &50,000 is still a great return, property showed to be the clear leader with approximately &90,000 higher return than gold and an overall profit of &140,000 based on annual house price increases.

Managing Director at Leaders, Allison Thompson spoke on the results explaining why property comes out on top, she said “Despite many changes over the last ten years to the housing market and wider economy, buy-to-let is still the clear winner. As well as the most rewarding, it is also the safest of all the investment options over the long-term. We have seen historically that, although cyclical, house prices always rise in the long run. With the acute shortage of housing across the UK, this is only likely to continue.”

Thompson also suggests that while many are looking for the right time to jump into property investment, short term fluctuations in the market shouldn’t deter potential investors: “Understandably, a lot of investors want to get the timing right when purchasing a property, but inevitably if you’re in it for the medium to long term, just learn to accept these fluctuations as any short term gains or losses. Second guessing and predicting the market will more than likely pale into insignificance in comparison to your overall return after ten years.” 

Bathroom
Turning your loft into a bathroom that’s isolated from the rest of the house, offers the perfect respite from the rest of the world. Use the space to add an oversized bathtub or a lengthy counter to fit in all of your toiletries and bathroom decoration.

 

Office
Tucked away from the hustle and bustle of the rest of the house and with a nice wide window to show off the inspiring view, you can really let your creative juices flow.

 

Kitchen
A kitchen in the loft might seem like a really strange idea, but it creates a great little social space, out of the way of general house guests (so be as messy or neat as you like!) Make sure you install the oven and sink under the highest point of the roof so that you don’t have to stoop!

 

Chill out space
Turn your loft into a distraction free space full of comfortable seating, soft lighting, neutral colours and wide open windows which will create the perfect environment to come back to a relax.

 

Games room
Has everything else we’ve suggested been a bit too functional? Why not turn your loft into a games room? A dartboard or fuzball (football table) could provide a much needed space for the procrastinator in all of us to come out.

 

Bedroom(s)
Got too many heads and not enough beds? Converting your loft can be an exciting way to create a new room for your little ones (or for you!)

In need of more than one room? You can expand the space by partitioning the loft or by adding a mezzanine to create extra sleeping room.