Buy to Let with Santander
As a landlord there's a lot to think about when letting a property. These pages give you useful information about your responsibilities and financial considerations. If you're looking to take out a new Buy to Let mortgage, please note that we don't offer them through branch or over the phone, so you'll need to speak to a financial adviser
Tax relief on your Buy to Let mortgage interest is changing
From 2017 the amount of tax relief that landlords of residential properties can claim on their mortgage interest will be gradually restricted to the basic rate of tax. Because this may change the income you make from your Buy to Let property, we’ve put together some information that may help you in the 'Paying tax' tab.
We've also included in these pages some information about being a landlord which you may find useful.
From 30 September 2017, landlords with 4 or more mortgaged Buy to Let properties will fall under the Bank of England’s definition of a portfolio landlord.
What does it mean for you?
If you currently fall under the portfolio landlord definition, there is no change to your existing Buy to Let mortgage(s) with Santander and you’ll be able to switch to a new product once your existing deal expires (subject to standard criteria). However, if you’re looking to expand your existing Buy to Let portfolio, we will be unable to offer you a mortgage on the new property. Likewise, if you remortgage to another lender, you will be considered as a portfolio landlord and might be asked to provide additional information on your Buy to Let business, such as a business plan and a property schedule.
Choosing a new Buy to Let deal
If your current Santander Buy to Let mortgage deal is coming to an end, you can quickly and easily change to a new deal online or over the phone. Take a look at our existing mortgage customers changing deals page to find out more.
Income from letting properties is taxable
From 2017 the tax legislation around Buy to Let income is changing. The deduction of some of your finance costs will be gradually withdrawn over four years, so that you'll only be able to claim tax relief on the basic rate amount. This could have an impact on the income you make from your Buy to Let property.
The government's Buy to Let pages contain examples to help you work out how the changes might impact your Buy to Let income.
The profit you make from letting your Buy to Let property is taxable. You need to declare any rent you receive as part of your Self Assessment tax return.
However, you can reduce the tax you have to pay by deducting certain 'allowable expenses' from your taxable rental income.
Take a look at the government's Buy to Let pages to find out more.
If you decide to sell your Buy to Let property, the proceeds from the sale will be subject to Capital Gains Tax. However, as an individual landlord you get an annual allowance to set against any profit you make from selling your property.
You can find more on Capital Gains Tax and the latest tax-free allowance on the government's pages
Stamp Duty Land Tax or Land and Buildings Transaction Tax is payable on a Buy to Let property in the UK. Find the latest rates of Stamp Duty Land Tax (England, Wales and Northern Ireland) on the government's pages and on Land and Buildings Transaction Tax (Scotland) on the Revenue Scotland pages
The above information is for indicative purposes only and should not be taken as tax advice. For advice you should consult with an independent tax adviser.
There are a number of responsibilities and financial considerations that you should take into account when letting a property.
The sections below go into the detail of some of the key points.
Use a letting agent or do it yourself? If you’re new to Buy to Let, don’t live near the property, or don’t have a lot of free time, it could make sense to use the help of a letting agent.
A letting agent will market your property, take care of the tenants’ screening process and tenancy agreements. You can also choose to have them take care of the ongoing relationship with the tenants and maintenance of the property.
You’ll need to pay agent charges (typically around 10-15% of the monthly rental) but they can be deducted as allowable expenses from your taxable rental income so may be worth considering.
A tenancy agreement is a contract between landlord and tenant and should cover a number of things, including details of the rent, the initial deposit and how and when the rent can be reviewed. The tenant’s deposit will need to be protected in a government-approved Tenancy Deposit Protection scheme.
An Assured Shorthold Tenancy agreement is the default agreement for all residential lettings in England and Wales. Wales will be replacing an Assured Shorthold Tenancy agreement with a Standard Tenancy agreement when The Renting Homes (Wales) Act 2016 comes into force. In Scotland, a Short Assured Tenancy is the most common type of tenancy but this is being replaced by a Private Residential Tenancy from December 2017. Short Assured Tenancies for Scotland and Assured Shorthold Tenancies for Wales may continue to be suitable agreements, until any existing tenancy expires or the landlord obtains a new tenant. It is your responsibility to keep yourself up-to-date on regulations affecting your Buy to Let property.
Getting the terms of the tenancy agreement right can be a daunting task so you might want to consider seeking advice from a letting agent or legal adviser.
As a landlord it is your responsibility to make sure the property is safe and in a good state of repair for your tenants.
Repairs you’re responsible for include the structure of the property and sanitary fittings, for example sinks and baths, heating and hot water systems.
Any soft furnishings and fittings you provide with the property, such as sofas or curtains, must comply with the relevant fire safety standards.
You should consider seeking independent advice on your legal responsibilities in this area.
Any gas and electrical systems must meet specified safety standards and will need to be inspected and serviced annually. A gas safety certificate, issued by a Gas Safe registered engineer will need to be provided to your tenants. It is also a good idea to have smoke and carbon monoxide alarms fitted and tested regularly.
As a landlord you’re also responsible for keeping up-to-date with any changes in the legislation to understand when your obligations change.
You'll need to provide your tenants with a valid Energy Performance Certificate (EPC).
An EPC gives information about a property’s energy use and typical energy costs.
From 1 April 2018, all properties let in England and Wales should have a minimum EPC rating of E. For existing tenancies, landlords have until 1 April 2020 to make the necessary energy efficiency improvements to the property. Landlords in breach of the requirement could receive a fine of up to £4,000.
Further information on required improvement and exemptions can be found on the Residential Landlords Association pages
To get an EPC, you will need to find a Domestic Energy Assessor. This will need to be done before you market your property to rent. For more information visit the Domestic Energy Performance Certificate Register
As well as insuring the building and any contents that belong to you, you might want to consider landlord insurance which often provides legal cover to help in case of disputes. Some policies also include options such as rent guarantee cover or landlord liability cover.
Further information on your responsibilities as a landlord can be found on the government's renting out a property pages
All applications are subject to status and our lending criteria. This means that the amount we will lend you will depend on your individual circumstances, the type of property and the amount you borrow. For example, we may require a higher deposit if you are buying a flat or a new build property.
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