March 28, 2024 10:34 am

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Nikka Sulton

New data from HM Revenue and Customs (HMRC) reveals a rise in the number of unincorporated landlords in the UK’s private rented sector (PRS), reaching 2.82 million in 2021 to 2022. These landlords reported a total property income of £48.87 billion for the same period, with an average income of £17,300.

London stands out as a hub for property income, hosting 16% of unincorporated landlords and contributing 26% of total property income. However, it’s essential to note that the report excludes incorporated landlords and individuals with insufficient income to file an Income Tax Self-Assessment (ITSA) return.


Average income from UK property was £17,300

According to the report, 99% of unincorporated landlords were individuals who reported property income through their self-assessment tax returns. The average property income in the UK amounted to £17,300 in the fiscal year 2021 to 2022, marking an increase from £16,300 in 2017 to 2018.

Furthermore, the data indicates a notable 10% growth in total income from UK property over the five-year period between 2017 to 2018 and 2021 to 2022. This upward trend can be attributed to both a rise in average property income and an increase in the number of individuals declaring property income.


Number of unincorporated landlords increased

In the fiscal year 2021–2022, the tally of unincorporated landlords saw an uptick, reaching 2.82 million compared to 2.73 million recorded in 2017 to 2018. This increment signifies a notable expansion within the realm of property ownership and management across the UK.

Delving deeper into the regional breakdown, unincorporated landlords in Wales, Scotland, and Northern Ireland collectively contributed 9% to the total property income. This distribution underscores the diverse landscape of property investment and rental activities across different parts of the UK.

Analyzing England’s geographical segments, the North East emerged with the smallest slice of the property income pie, accounting for a mere 2%. This observation sheds light on the varying degrees of property market activity and investment opportunities prevailing within England’s distinct regions.


How much deposit do you need for a buy to let mortgage?

On a Buy to Let mortgage, borrowing hinges on the rental income. Most lenders mandate a minimum 25% deposit, while some may request up to 40%. Opting for a 15% deposit is feasible but attracts higher interest rates and limits lender options.

With a 25% deposit, you gain access to a broader array of lenders and mortgage deals, enhancing flexibility for your investment property. When considering a buy-to-let remortgage, ensure equity ranging from 25% to 40% of the property’s value to meet lender criteria.

Moreover, lenders often enforce a minimum ‘rent cover,’ usually set at 125% of the monthly mortgage repayments. For instance, to cover a £500 mortgage repayment, you’d typically need to demonstrate a rental income of £625 per month.

Previously exempt from stress testing legislation, buy-to-let mortgages now face changing regulations. Coupled with factors like escalating SDLT (Stamp Duty Land Tax), exclusion from recent Capital Gains Tax reductions, and the phased reduction of Mortgage Interest Tax Relief, prospective landlords are reevaluating their investment strategies.


So how much could you borrow?

The borrowing capacity with a buy-to-let mortgage varies significantly from a standard residential mortgage. Lenders primarily focus on the property’s rental income rather than the borrower’s personal earnings. Deposit size influences borrowing limits, impacting the loan-to-value (LTV) ratio.

For instance, aiming to borrow £150,000 against a buy-to-let property valued at £200,000 results in a 75% LTV. Moreover, lenders typically impose a minimum ‘rental cover calculation’ requirement, often set at 125% (or 145%) of the monthly mortgage interest payments.

In practical terms, to qualify for a mortgage repayment of £1000, you’d need to demonstrate rental income of at least £1250 per month. This stipulation ensures that rental income adequately covers mortgage expenses, safeguarding lenders against default risks.


What’s the minimum deposit requirement?

Some lenders entertain applications with deposits below 20%, even considering those under 10%. However, meeting all other eligibility criteria is imperative for success.


Can you get a 100% LTV deal?

Indeed, these mortgages invariably necessitate a deposit. Acquiring upfront capital is essential for venturing into rental property investment. Alongside the mortgage deposit, one must also factor in additional expenses like legal fees, letting agent fees, renovation, and maintenance costs.




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