Information for Landlords
(please see all the information below or download the booklet HERE)
Whether you have never rented out a property before or you are experienced landlord, this is the section for you.
It can be a bit stressful if you are currently trying to perfect your rental property, try and get it advertised privately or through an agent. With so much to do, you can forget the most important elements of renting a property, and if you rush a tenancy the most important things might be forgotten about.
This is extremely important, whether you are doing it yourself or you are trusting an estate agent to do this.
If you are doing this yourself, try to use an established referencing company, some ask you to fill in an online application others ask you to fax or post applications. These companies are excellent as they can access a lot of information that you cant and give you a better idea of your new tenant.
If you are trusting an estate agent to do the referencing, some agents use the companies mentioned above, but some do the referencing themselves. If the estate agent is doing the references themselves make sure you see the references before the commencement of a tenancy. The References should be on headed paper as faxes and emails can be fake or not clear. If in doubt use the contact numbers on the reference to confirm the details of the tenant and contents of the letter.
The most important references to see are: a bank status enquiry (this is supplied by the applicants bank), this gives you details of how long the applicant has had the account, and whether the bank would consider them trustworthy (within this conclusion, the bank check for credits, debits and whether the applicant has gone overdrawn etc) and a current employers reference. The current employers should have employed the tenant for over 6 months. Make sure the reference includes the following: Is the contract permanent or temporary?, The Salary they are on. Would they consider their employee trustworthy. Based on the salary, DO YOUR FIGURES!, Can this tenant afford their portion of the rent?? If the employer has not employed the tenant for over 6 months, you must obtain a previous employers reference and this must include: The previous salary and reasons for why the tenant left that job. If they were sacked, you might want to re-consider.
Right to Rent Certificate
Under the immigration Act 2014 (S32 (6) (a)) the immigration status of all tenants has to be checked and verified before a tenancy or renewal tenancy can be granted.
Gas Safety Certificate
If your property has gas anywhere within it, you MUST have a Gas Safety Certificate. This must be carried out before the tenancy and must be valid at all times. MAKE SURE YOU HAVE ONE CARRIED OUT EVERY YEAR!, if you don't the consequences can be fatal....a £6000.00 fine or even a prison sentence. The cost for this is between approx £65.00 and £90.00, but make sure you use a corgi registered gas inspector. (price correct as of 2012)
EPC (Energy Performance Certificate)
By Law since 2006, before you can advertise your property, you do have to have an Energy Performance Certificate.
The Certificate shows the Energy usage over a year period, please see the sample below:
The approximate cost for one of these is £75 + V.A.T (price correct as of 2012)
If using an Estate Agent, double check what they have agreed with the potential tenants. Some estate agents agree a deal that the property is furnished when the landlord has offered it un-furnished. You do not want to be asked to furnish it days or hours before the tenancy. Have the agents advertised it to include or exclude bills? What deposit do they take from the tenants? Are their any hidden costs on the agents behalf? The agent should not take any other fees other than the negotiated fee before advertising. Some agents try to charge you a tenancy agreement fee, why should you pay that??? they are getting enough from you anyway. Make sure this is clarified before they or you sign the agreement. (if in doubt ask the agency to amend the contract to suit you...but don’t go to far!! amending pages and pages)
If you have negotiated the deal yourself, make sure the tenants are aware of what you have advertised. If you are including bills or excluding bills? Furnished or Un-furnished? The deposit and rent, are you taking 6 weeks deposit (recommended) or One month? Make sure this is clarified before they or you sign the agreement. (if in doubt amend your contract)
Condition of the Property
The property must obviously be let out in a satisfactory condition. If in doubt get a professional clean done! Tenants must leave the property in the condition that they found it. If you did not professionally clean it before the tenancy, you cannot expect the tenants to when they leave.
Various companies have a different idea of a 'Professional Clean',(some companies think a quick once over and a hoover is classed as professional - well it is far from it!! So our advice is USE AN INVENTORY CLERK! they will give you a detailed description of the condition of the property. You and the tenants sign this inventory at the beginning of the tenancy to agree on the condition, so again will prevent disputes at the end of the tenancy. It just saves you hassle, so get one!
By Law as from April 2007, all tenant deposits must be registered under a Tenancy Deposit Scheme. Once registered a certificate will be issued and the deposit must be held in a non interest baring account.
If you are a landlord with multiple properties it might be worth registering as an individual landlord under one of the schemes (best scheme is www.mydeposits.co.uk)
If you have only one or two properties, all letting agents will offer the service of protecting the deposit and holding it for you.
Please note, if you do not register the deposit and issue a certificate to your tenants, at the end of the contract, the tenants can claim up to THREE TIMES the original deposit amount.
Make sure you have enough keys for all your tenants. Also keep a set for yourself (include window keys, any padlocks, toilet locks). If you trust your estate agent, leave one set with them for emergencies, (if they will allow you - but they should) If an agent is managing your property, you will have to leave a set with them anyway for inspections, emergency jobs etc, after all that is what you are paying for!
Before you rent out your property take all meter readings, after all you do not want to be paying for electricity and gas you have not used!! Inform the utility companies that you are moving out and as soon as you know the new tenants names supply these. Or if you trust the tenants to update the utility companies then feel free to let them do it.
Overseas Landlords Tax Guide
This is a brief tax guide to describe how rents and tax are handled in the situation where the landlord is resident overseas. It does not however attempt to cover the wider aspects of personal taxation. If you are unsure which forms you need or how to fill them in, then you are advised to seek further advice from your local tax office.
Will I need to pay tax?
All owners of property in the UK are required to pay tax on their letting income unless the income after allowable expenses is less than an individual’s personal allowances. However, special rules apply to the UK rental income of non-residential landlords (NRL) or landlords who live abroad (usually for more than a six month period).
Non-Resident Landlord Scheme
The NRL scheme operates for rental income paid on or after 6 April 1996 and replaces the old rules under Taxes Management Act 1970. If you want information about the earlier scheme, ask your Tax Officer.
If you let your property through an agent then the agent must operate the NRL Scheme and deduct tax from your rental income, unless they receive written notification to the contrary. In simple terms, the Agent will either:
If authorised by the Revenue, pay the rental income to their non-resident client gross, or
Deduct tax at the basic rate on net income subject to certain allowable expenses and deductions.
The NRL scheme is operated by the Revenue’s Financial Intermediaries and Claims Office (FICO). Non-Resident landlords can apply to FICO for approval to receive their rental income gross or with no tax deducted (an ‘approval’). If the application is successful, FICO will issue a notice and the agent will not be required to deduct tax.
Landlords with poor tax histories may be refused an approval, and in these cases agents will be obliged to continue to withhold tax at the current basic rate on their net rental income.
It is important to inform the Revenue if your tax situation changes (e.g. if you return to live in the UK) or if your letting agent changes.
How do I obtain an approval to receive rental income gross?
An approval will allow you to receive all rental income due without deductions to cover tax liabilities. The forms are available from FICO or your letting agent. You can apply for approval if:
Your UK tax affairs are up-to-date
You have never had any UK tax obligation or
You do not expect to be liable to UK tax
Many people are entitled to set personal allowances against their income. If your UK income after allowable expenses is less than your personal allowances, then you will not be liable for tax. Landlords and Agents will be notified simultaneously of decisions to grant or withdraw approval. Approvals can be cancelled by the Inland Revenue if returns are filed late or tax is not paid on time.
Where non-resident landlords qualify for approval to receive rental income gross, the landlord should apply for approval as soon as possible. Only tax deductions made in a particular quarter can be refunded by the agent.
What happens if a Landlord has no approval?
Your agent will be required to withhold and pay the tax due on your behalf if you are non-resident and if approval to receive gross rental income has not been received within 30 days of each quarter. Quarters end on:
Tax will be deducted at a basic rate as a percentage of the quarterly rental income taking in account only cash received and cash paid by the agent. Your agent will issue you with Certificates of tax paid which you should include with your tax return.
At the end of the tax year, you should still declare your letting income on your tax return in the normal way and you can reclaim repayment of any overpaid tax.
How is the tax calculated?
If required, the agent will calculate the tax each quarter for each non-resident landlord. The tax will be calculated at the basic rate on property income received in the quarter less allowable expenses.
Rental income (for the quarter)
Less: Allowable Expenses
Tax Retained @ 22%
Allowable expenses are those paid by the agent in the respective quarter. Expenses are allowable if they are incurred wholly and exclusively for the purpose of the rental of the property, and they are not of a capital nature. Thus, for example, any repairs to the property, water rates, insurance, management fees or other professional fees are allowable. However, letting agents cannot deduct expenses paid by the landlord nor any capital or personal allowances.
The scheme applies to the UK rental income of persons whose usual place of abode is outside the UK (non-resident landlords). Landlords may be individuals, companies or trustees.
For tax purposes individuals will not be regarded as having a usual place of abode outside the UK, if they are temporarily living outside the UK for, say, six months or less.
Where property is let jointly be two or more landlords and one or more of them has a usual place of abode outside the UK, the scheme applies separately to the rental income of each non-resident.
Overseas Landlords can print off an NRL1 form here:
Keeping up with managing your property - if it sounds all too much, why not get in contact with us, I am sure we can accommodate your needs.
You have nothing to lose, so email us with your details and we will respond as soon as we can!