July News Round Up
11th July 2019
BTL landlords at risk from HMRC crackdown
A HMRC has been mailshotting thousands of UK landlords as part of its Let Property Campaign, suggesting it knows that they are not declaring the full tax they owe. Overseas landlords, many of whom are UK expats rather than wealthy foreign investors, are now coming forward in response to the campaign, which is designed to encourage landlords to voluntarily disclose to HMRC that they have not paid the full amount of tax on their rental income. Over the last tax year, 397 overseas-based buy-to-let landlords admitted to HMRC that they had not been paying the tax on their rental income, up 61% on the 246 that came forward in the previous year, according to accountants Moore Stephens. If landlords do not respond within 30 days of receiving a letter from HMRC, they are liable to face penalties based on what HMRC believes they owe, or even criminal investigations for non-compliance. HMRC is using its immense artificial intelligence (AI) database, Connect, to gather more information on landlords. Connect allows the tax authority to cross-check activity across innumerable information sources from property disclosures on tax returns to estate agents’ client lists and land registry data, as well as social media profiles and extraordinary spending patterns to identify instances of tax avoidance and evasion.
Mortgage rates to be slashed for green homes
Homeowners could reduce their mortgage rate, save money on their energy bills and reduce emissions from their homes under new government proposals. A £5m fund has been launched by the Department for Business, Energy and Industrial Strategy (BEIS) to the financial sector to increase the number of ‘green’ mortgages available. Households that successfully upgrade the energy rating of their home will be rewarded with access to discounted ‘green’ mortgage rates. The government has committed to producing net zero emissions by 2050, and essential to this will be improving the energy efficiency of the 17 million homes currently with an Energy Performance Certificate below band C. Currently, green mortgages favour homeowners in new properties who find it easier to make their homes more ‘green’. Older properties can be a challenge to make more environmentally friendly with homeowners unable to increase their rating sufficiently to make any meaningful savings on their mortgage. BEIS has said that a separate £10m innovation fund will be launched to help the industry find ways to retrofit older properties with environmentally friendly technology, with minimum disruption to homeowners. Green mortgages have been available for several years, but have not yet reached the ‘mainstream’, remaining a niche product. They tend to be available from smaller lenders such as the Ecology Building Society, which rewards customers with a 1% discount on their borrowing if it is used to make ‘green’ improvements such as having their loft insulated or solar panels installed. Barclays launched a green mortgage last year, but it is limited to giving buyers of new-build energy efficient homes access to lower interest rates and is not available to homeowners that improve the energy efficiency of their existing home. And BNP Paribas working in partnership with Eon are developing a green mortgage plan to enable homeowners to extend borrowing on their mortgages with a linked ‘energy efficient home improvement’ loan.
Self-assessment fines on the rise
HMRC has fined 14% more people year-on-year for late self-assessment tax filing, leaving well-intentioned taxpayers frustrated. “The pool of people at risk of being fined for late payment is now bigger than ever as self-employment continues to grow,” said Tim Woodgates, associate and tax specialist at Moore Stephens. “UK taxpayers are feeling the pinch. As a result, some do not have the money to pay the tax bill on time, even though they want to.” In 2015/16, 291,000 taxpayers were penalised for late payments, while that figure jumped to 331,000 in 2016/17 (the latest full year available). In 2017/18, HMRC has already raised 233,000 fines says Moore Stephens. The jump in fines may be attributed to the record number of self-employed individuals, which has soared by 180,000 in just one year to make a grand total of 4.93m in March 2019. Moore Stephens suggests that new taxpayers are unfamiliar with tax deadlines and suffer as a result while appeals are increasingly in vain. If the taxpayer is 30 days or more late in paying their tax returns, they are issued with a fine of 5% of all the outstanding tax. At six months, they are issued with a further fine of 5% of all the tax due at that date, and repeated again at 12 months.
A golden opportunity?
When one of the world's leading fund managers, renowned for his passion for equities, says every investor's portfolio should have a heavy dose of exposure to gold, it is time to sit up and listen. That is exactly what happened last week when veteran manager Mark Mobius, a long-time investor in emerging markets, said he 'loved' gold and that investors should have at least 10% of their assets in the precious metal. His comments came as its price climbed to a six-year high of more than $1,413 (£1,125) an ounce. According to experts at trader BullionVault, gold prices for UK savers have only ever been higher on 20 other occasions throughout history. It confidently predicts that by the end of the year, the all-time peak of £1,195 – reached in the summer of 2011 when debt crises were sweeping across Europe and the United States – could look 'cheap'. The surge in gold prices has been fuelled by a number of factors including mounting geopolitical tensions in the Middle East, the continued trade war between the United States and China, and downward pressure on interest rates. This basket of concerns has highlighted gold's status as a store of value and a safe haven during times of uncertainty. Commentators believe that over the next decade deflation will dominate the economies of the United States and Europe, resulting in suppressed interest rates. In times of deflation, he says gold is a 'good asset diversifier' and proves popular as investors search for real, physical financial assets.
London property prices to benefit from proposed stamp duty changes
Stamp duty change could revive prime property prices by £700,000, helping the top end of the housing market to recover from the current slump which is attributed to the high level of tax and Brexit uncertainty. Boris Johnson, the favourite candidate to become the next Prime Minister has pledged to abolish the property tax on homes under £500,000 and reverse the rise on prime and super prime homes that was introduced in 2014 by the then Chancellor George Osborne. New research by prime London property portal Vyomm, has revealed the extent of this initial decision on the market and says that a reversal in stamp duty tax thresholds at the top end could help boost buyer demand and increase high end house prices by as much as £700,000. Before December 2014 the stamp duty rate for properties between £1 million and £2 million was 5%, rising to 7% from homes sold for £2 million or more. This was increased to 10% on homes from £925,000 to £1.5 million and 12% over £1.5 million. As a result the average sold price for homes above £1.5 million in London fell by 3.41% or £101,410 in a year and for properties above £10 million it fell by 4.66% or £738,653 over the same period.