Changes to tax relief for UK landlords being phased in between 2017 and 2020 mean that many buy to let rental properties may no longer be able to generate a reasonable profit for their owners. As a result, many buy to let landlords are likely to be considering selling up so they can invest their money elsewhere.
If you are thinking of selling a buy to let property, you should give careful consideration to the following points to ensure you get the best possible return from disposing of your investment.
When to sell
While housing markets are continuing to perform well in some parts of the UK, other areas are seeing prices freeze or even begin to fall. Various factors are likely to be contributing to this trend, including uncertainty over Brexit. It is therefore a good idea to spend some time researching the housing market in your local area to get an idea of whether you are likely to get a good price at the moment.
It is worth bearing in mind that the changes to tax relief for landlords are being phased in over the next few years, with landlords currently able to deduct 75% of finance costs (including mortgage payments) from their taxable profits. This is dropping to 50% for the 2018-19 tax year, 25% for the 2019-2020 tax year and 0% from the 2020-21 tax year onwards.
This means that if housing prices in your area have fallen, it may be worth waiting to see if the local market recovers before selling. However, you will have to judge this against the impact of the increasing reduction in tax relief to judge when the best time to sell is likely to be.
Regaining vacant possession
If you have sitting tenants that need to leave before you can sell your property, there is a strict legal process you will need to follow. Generally speaking, if your tenants have a fixed term tenancy you will not be able to evict them until that tenancy ends. You will also normally need to give the tenants at least 2 months’ notice if you want them to leave.
When evicting tenants, it is a good idea to consult with a property solicitor experienced in landlord and tenant law to ensure you follow the correct legal procedure. If you get the process wrong, you could be accused of harassment or illegal eviction and it will likely end up taking you longer and costing you more to regain possession.
Your liability for Capital Gains Tax
When selling a buy to let property, you may be liable for Capital Gains Tax if you make a profit from the sale. Exactly what your liability for Capital Gains Tax will be will depend on various factors, including if the property is owned through a business, whether you have spent money improving the property and whether the property was occupied by a dependent relative.
Capital Gains Tax liability can be a complex issue, so it is highly recommended to seek advice from a professional financial advisor when selling buy to let property. This will ensure that you understand your tax liability and can explore options for the most tax-efficient way to dispose of your property.
Should you renovate?
Renovating your buy to let property before selling could help you improve your return on investment, especially if the property has had no significant work done on it for a number of years. However, you will need to get a realistic idea of how much the work is likely to improve the value of the property, versus the cost of renovating, and consider how this will affect your liability for Capital Gains Tax.
Who to use for your conveyancing
When selling any property, it is important to make sure the legal side of the transaction is handled effectively and efficiently. This helps to minimise the chances of any delays or legal issues that could hold up the sale or hurt your financial interests. It is a good idea to look for a conveyancing team experienced in selling buy to let properties for landlords to make sure they have the expertise you need for a smooth sale.
Use a conveyancing team you can rely on
Bird & Co Solicitors is a Conveyancing Quality Scheme accredited law firm offering conveyancing services for landlords and homeowners across England and Wales from our 3 offices in the East Midlands. We offer a reliable, efficient and cost-effective conveyancing service, making the process as smooth and stress-free as possible.
Our conveyancing solicitors regularly work with landlords all over the country, helping them to ensure their commercial interests are protecting when selling and buying rental property. We have the expertise to help you dispose of your property efficiently, freeing you up to move on to new investments.
To find out more about our conveyancing for buy to let property, call us today on 01476 591711 or use our contact page for details of your nearest Bird & Co office.