At the recent Landlord Investment Show in London, Paul Shamplina, Founder of Landlord Action and Brand Ambassador at Hamilton Fraser, chaired a panel debate on the topics of tax, finance and legal advice for buy-to-let landlords. The panel took part in a Q&A and shared their tips on the latest tax, legislative and financial challenges that buy-to-let landlords face today.

The panellists included: Sean Hughes, Chartered Tax Advisor from Comprehensive Tax Planning; Jenny Brown, Sales Director from Mortgages for Business; Vincent Burch, from Vincent Burch Ltd (an independent mortgage broker); and David Hanna, specialist Tax Adviser at Cornerstone Tax.

Here, we share some of the key takeaways and provide top tips from Paul Shamplina and the expert panellists.

Advice for new buy-to-let investors

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The panel had plenty of useful advice for those who have recently become, or are interested in becoming, buy-to-let investors.

Paul suggested that the first thing anyone who is planning to become a landlord should consider is what type of landlord they want to be. There are several different approaches to managing properties, and it is important to understand what will work best for you. For example, you may choose to be a passive landlord with little involvement with or responsibility for your tenants, an HMO owner with multiple tenants, or a portfolio landlord with several properties and a much larger remit of responsibility.

Vincent Burch advised that it is important to research the property market thoroughly; this will help you to decide what type of property you want to invest in and what sort of return on investment (ROI) you can realistically expect to make. Similarly, Jenny Brown emphasised the importance of research and also suggested speaking to a mortgage broker to gather information about the mortgage market.

Tax, finance & legal advice

A member of the audience raised a question about the potential tax benefits of moving to a limited liability company (LLC) or a special purpose vehicle (SPV) (a company set up for the sole purpose of renting out properties). Vincent Burch advised landlords to consider how much it will cost them to move to a limited company, pointing out that although mortgages are more expensive when applying as a limited company, they offer better tax relief.

Sean Hughes suggested that the choice to move to a LLP or SPV depends entirely on personal circumstances and that landlords should be mindful of the tax processes and implications when transferring property to a limited company. He advised that if a property has increased in value between the time of purchase and the present time, the landlord will have to pay Capital Gains Tax (CGT) on the property if they decide to move to a limited company. However, if you own five or more properties, and spend at least 10 hours on average per week fulfilling landlord duties, you may qualify for ‘Incorporation Relief’ which means that you won’t have to pay CGT that has accumulated on the property if you want to transfer to a limited company.

Business planning for landlords

The panel provided some tips to help landlords with effective business planning. Jenny Brown suggested that landlords should add a 20 per cent contingency on top of every potential cost, because landlords’ costs are often higher than anticipated.

The panel also advised landlords to take into account refurbishment and maintenance fees, along with planning for the unexpected, for example the possibility of a property becoming vacant, resulting in an unplanned void period. Landlord insurance isn’t compulsory, but a comprehensive policy like Hamilton Fraser Total Landlord Insurance’s premier policy will provide full cover between tenancies, as well as for loss of rent or alternative accommodation and malicious damage by tenants or guests. As a landlord, you can’t possibly plan for every eventuality, but you can take steps to reduce your risks.

With the growth in build-to-rent, Paul pointed out that a growing number of tenants are choosing to rent from corporate landlords. This shift amongst many tenants towards a preference for dealing with professional landlords presents serious competition for landlords. Paul emphasised that it is important for landlords to seriously consider how they manage their properties and tenants to ensure that they appear professional and reliable and to factor this into their business planning.

Section 21

The panel discussed the backlash and potential implications of the abolition of Section 21. The 2019 general election manifestos confirmed a cross-party consensus that Section 21 will be scrapped. Paul highlighted that over 20,000 landlords challenged the consultation to ban Section 21, and that the ban could cause large amounts of landlords to leave the property market. The panel agreed that scrapping Section 21 would have to be supported with considerable investment and reforming of the Section 8 rule in order to maintain the balance between tenant and landlord rights.

As Paul says in his previous 2019 wrap up article for LandlordZONE, A ‘look back’ and ‘look on’ at landlord liabilities , “Despite strong opposition from landlords and the industry, including myself, it would seem that whichever political party wins the election, Section 21 will be scrapped.  For me, this could have the greatest impact on the PRS we have ever seen, especially without substantial funding for our court system.”

Paul regularly chairs discussions and speaks at the Landlord Investment Show and other industry events, winning the award for ‘Best seminar speaker’ at this year’s Landlord Investment Show Awards.

The Landlord Investment Show is attended by thousands of industry players, including landlords, investors, letting and estate agents, property developers, and other specialists within the private rented sector. The event is a leading landlord & property investment exhibition, showcasing panels of industry professionals and key speakers who discuss a wide range of topics regarding the buy-to-let sector. The next Landlord Investment Show will take place on 19 March 2020, at Olympia London in Kensington. If you would like to learn more about the show and how you can attend, visit the event’s official website.

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