Christmas is an expensive time of year for most people, which is why having a good grasp on your finances is essential; however it seems as though some landlords are not taking managing their finances seriously enough. We have already seen reports concerning landlords who are failing to pay the right amount of tax or set up contingency funds to protect them should the worst happen. Furthermore, many articles claim that it’s not just the landlords that suffer from financial mismanagement but tenants too.
According to the tenant referencing and rent collection specialists Landlord Assist, the number of landlords who will see their tenants fall into rent arrears will rise over the festive period. In order to prevent this having a knock-on effect on their businesses, landlords should create a contingency fund that they can use should they receive less income via rent payments. Graham Kinnear, managing director at Landlord Assist, said: “December is a time when we see people’s budgeting priorities change, with people keen to spend money on gifts for family and friends.
“Christmas is an expensive time of year and many people feel pressured to spend money they simply don’t have, with many also tempted to use credit cards and payday loans to cover the cost. In some instances this leads to an inability to meet their rental obligations and puts tenants in an unenviable position of facing arrears in the New Year. We urge tenants to budget carefully for Christmas and not risk to their homes by slipping into arrears with their landlords.”
Worryingly, there has been a marked increase in the amount of evictions due to rent arrears in the UK over recent months, meaning that failing to pay rent on time can lead to tenants losing their homes at one of the most inconvenient times of the year. Some of the worst hit are those that have had their benefits reduced under the new welfare reforms, especially those that have been affected by the new ‘bedroom tax’. This is one of the reasons that protesters have called for a ban on evictions for those that have fallen behind on their rent due to the bedroom tax, however many local authorities do not support the idea.
Instead, most local authorities are looking to ensure that landlords take more responsibility when it comes to their business, ultimately improving the private rental sector and the wider economy. The amount of tax that landlords pay has often been debated in the media, with an increase in accidental landlords leading to a deficit in the amount of taxed paid within the sector. This is one of the reasons the HMRC has recently created a new website called Property Tax for Landlords where landlords can find more information on how and what tax they should pay.
According to the HMRC, there are around 1.4 million landlords across the country, however only five hundred thousand of these fill in regular tax assessments. Furthermore, out of those that do pay their taxes many don’t claim the right amount in rental property expenses, ultimately overpaying the HMRC and reducing their overall income. Steve Sims from Property Tax for Landlords said: “The idea is to empower landlords and to help them run their rental portfolios as a business. Too many pay too much tax because they do not know how to keep financial records or claim the right business expenses.”
Perceiving letting properties as a business is just one of the ways that landlords can improve their offerings and services to their tenants. At PropertyQuoteDirect we often advise that landlords should take the time to keep their finances in order and ensure they are adhering to all landlord legislation in order to keep their companies thriving, and now it seems that the government and local authorities are following suit. Investing in a landlord insurance policy that contains rent guarantee insurance is a great way to protect your business against rent arrears, especially over the Christmas period where money is so tight.
Letting your properties in a business-like manner will also improve the private rental sector as a whole, as it means that there will be more good quality, affordable housing, as well as less rogue landlords taking advantage of those that are struggling due to the housing crisis. During Christmas this is more important than ever, and by doing your bit you will ensure that both you and your tenants can enjoy the festive season.