Changes to the rental sector announced in the Budget should make landlords extra vigilant when finding tenants, a Swindon company has warned.
In his Budget last week, Chancellor George Osborne cut the mortgage relief landlords can claim, and at the same time raised the amount of tax-free income on renting a room.
But Swindon-based Tenant Screening, which provides a vetting service to landlords and letting agents across the country, said both measures should make landlords extra vigilant when it comes to checking out prospective tenants.
“Under the Rent a Room scheme, the Chancellor raised the amount of tax-free rental income from £4,250 to £7,500 from April 2016,” said Tenant Screening manager Kelvin McCarthy. “That makes the Rent a Room scheme much more attractive, with people joining the scheme who may have no experience of being landlords.
“While that’s great for the rental market, people really need to check out who they are going to be sharing their house with, at a minimum a basic credit check should be completed to identify the individual and confirm their financial situation. We’d also advise on having a criminal record check carried out, which will reveal any unspent convictions an individual may have.”
The change in mortgage relief for buy-to-let landlords involves cutting it from 40 per cent or 45 per cent to 20 per cent by April 2020. The change will be introduced over four years from April 2017.
With landlords losing out, there could be a temptation to pass this on in the form of rent increases. Kelvin said: “With landlords getting a smaller margin, they may want to increase rents, so it is all the more important to check each tenant’s financial suitability.”
A third measure, which Kelvin said has gone largely unnoticed, is a change to a landlord’s ‘wear and tear allowance’. Currently, a landlord can claim 10 per cent of the net rent as a wear and tear allowance for furniture and equipment provided with a furnished residential letting. From April 2016, landlords will be able to deduct only costs they actually incur.
Kelvin said: “Again, this will eat into a landlord’s income, so the cost may be passed on to a tenant and with higher rents likely it’s all the more important for landlords to make financial checks on their tenants.”
Tenant Screening offers landlords and letting agents across the UK a screening service for potential tenants. Kelvin and his team can make a number of checks on would-be tenants ranging from credit checks, criminal record (DBS) checks, residency and ID verification, to employment and landlord referencing, as well as identifying court or insolvency information held against the prospective tenant.
For more information, visit: www.tenantscreening.co.uk
Pictured above: Kelvin McCarthy of Tenant Screening