CEO OF ONLINE LETTINGS AGENT WWW.UPAD.CO.UK
Q. I've heard I need planning permission to let a house to three people sharing. Can this really be true?
A. As of 6 April, if property previously occupied by one household (family) is let to three or more unrelated sharers, forming two or more households, this will need planning permission. Unrelated sharers can include groups of students or nurses; it can also mean a couple and their lodger.
The new regulations are not being applied retrospectively: that is to say, if you have a property already let to three people sharing, you won't have to get planning permission to continue with that rental. You also won't need planning permission if a property previously let to sharers is then let to a single family or household.
Your local council will be able to give you more details of exactly what you'll need to do, and what it’s going to cost.
Q. I'm renting out a property to a friend who's just covering my mortgage, so I'm not making any profit. Do I still have to tell the taxman?
A. If you have income from property, then you’ll need to declare it to HMRC, regardless of whether you're actually making a profit or not. If you're not making a profit, then there’s unlikely to be any tax to pay – but you do still have to notify the tax office. Tax is assessed on the profit from rent: that is, all the income from all your properties minus all allowable expenses. If you rent out more than one property, you’ll be able to set a loss on one of them against profit from the rest.
If your annual profit is less than £2,500 and you’re on PAYE, any tax due can be paid via an adjustment of your tax code. Ask your Tax Office for form P810. Those earning more than £2,500, or who are self-employed anyway, will need to fill out a Self Assessment tax return.
The only time the above doesn't apply is if you’re renting out a room in your own home: in that case, if you’re receiving £4,250 or less rent annually, you fall under the Rent a Room Scheme, which doesn't require you to fill out a tax return or otherwise inform the tax man.
Assuming that doesn't apply in your situation, it’s always best to contact HMRC – who are generally very helpful – before they come looking for you.
Q. Can I fine tenants for late payment of rent? I feel like every month I spend more time chasing people up, and I'd like to give them a real incentive to make sure they pay on time?
A. Most standard AST agreements contain a clause providing for this, normally around 4 per cent above bank base rate. At the moment, you might consider that this is not really worth arguing over: interest for a tenant who’s a month late paying £750 rent, say, will be around £2.81. It’s hardly worth the effort to send them the bill, let alone chase up the payment.
From your question, I guess you're thinking of something a little bit heavier than this. Some landlords and lettings agencies introduce much more stringent penalties into their contracts: for example, £10 for each day the rent is late. It's likely that this type of penalty clause would fall foul of the Unfair Terms Regulations, and would therefore be unenforceable.
In practice, it's better to assume some time spent chasing rent is part of your job as a landlord, and to cost that time into what you charge on rent.
James Davis is CEO of online lettings agent www.upad.co.uk. You can also follow Upad on Twitter: @avoidthevoids