- 4 Million tenants could be negatively impacted from the tax-relief changes.
- 55% of UK landlords are not aware of the tax-relief changes.
- 44% of UK landlords will increase the rent to offset the losses incurred from the new legislation.
- Tax-relief cuts will drive landlords out of the property market.
- First time buyers will find it harder to save on a deposit.
Over the past 20 years, buy-to-let was a great investment. In recent times, it has experienced a renaissance: mortgage rates and interest rates have been at a record low, encouraging more investors to snap up properties in the hope that its value will rise. In fact, buy-to-let landlords own 15% of residential property in the UK.From April 2017, things will change, over a period of 4 years.To the surprise of all, George Osbourne recently dropped a bomb shell, and announced big changes in the tax system, designed to limit the advantage buy-to-let owners have over those purchasing their own home. The most important and drastic change is the tax-relief on rented homes will be cut from 40% or 45% to a basic rate of 20% with the inevitability that losses will be recouped by landlords through bumping up rental prices, meaning renters will also feel the squeeze.
What does it mean for landlords?
The majority of landlords are in for a shock. According to a survey conducted by EasyRoommate, over 55% of the landlords surveyed are not aware of the tax-relief change. Landlords urgently need to familiarise themselves with the complex tax changes and its implications.
I believe that the buy to let tax changes will make investments a less appealing proposition for landlords and discourage investors. This increase in tax will drive landlords to recoup their losses, and what a better way of doing that other than by increasing the rent. In fact, 44% of the respondents said they would consider increasing the rent to offset the losses incurred by the tax increase, which is worrying news for renters.
To make matters worse for landlords,new tax changes mean they will also lose the right to claim 10% of the rent against wear-and-tear costs from April 2016. This will result in landlords reducing the levels of general property maintenance and improvements carried out and lead to landlords neglecting basic tenant demands for property improvements. This will have a negative impact on the standard of private rented accommodation.
Furthermore, this change in tax-relief could drive some landlords out of the property market given it will no longer be the profitable business it once was. Many landlords may now see fit to sell their property for let, resulting in tenants evicted from their rented accommodation.
George Osbourne claims that buy-to-let landlords have historically been taxed more favourably than home owners,I would dispute this – in fact, buy-to-let owners are not only taxed on rental income but also capital gains.
To provide further insight into British Landlords, I met Benjamin who’s a veteran buy-to-let landlord with a portfolio spanning 5 flats.
- Karim: ‘What is your opinion on the tax-relief changes planned for April 2017?’
- Benjamin: ‘Like a lot of landlords, I was shocked when George Osbourne announced the changes. The government is putting us in the same basket as home owners. I think this is extremely unfair as we are taxed on capital gains and the income we get from rent. Every other business in property is allowed to offset their total costs against their income before being taxed on their profit. I believe the next four years will be very challenging for us.’
- Karim: ‘What do you think the impact will be on buy-to-let investors like yourself?’
- Benjamin: ‘I think the impact will be negative. I predict that a lot of landlords will change their business structures. Not only that, some landlords will be forced to sell their properties to avoid falling into negative cash flows. Others, would have to increase their rent.
- Karim: ‘What do you think is the solution?’
- Benjamin: There is a petition which is gathering momentum. Landlords should unite by pressuring the government to revise and reverse this change.
What does it mean for tenants?
In London, tenants pay around £692 on average to rent a double bedroom per month. It is hard to contemplate that this astronomical amount would increase. But the tax-relief change could spell bad news for tenants. In fact, in a recent survey from EasyRoommate indicated, 44% of the landlords look set to increase rent prices to offset their losses.
To put numbers into perspective, let’s look at a hypothetical but realistic scenario. Peter earns £26,000 per year, the average UK salary. He rents a room in Notting Hill for £800 pm (£9600 per year).If his landlords increases the rent by 15% per month he would have to pay an extra £120 pmor £1440 per year. He now pays £11,040 per year.This would mean 42% of his income would go on rent. As of 2015, there were about5.4 million people privately rentingin the UK (as Pwc study found)and it would mean that 2.4 million tenants would be negatively impacted by the rent rise.
Furthermore, supply is already scarce in the UK, especially in London where there are 10 tenants seeking a room for every one double bedroom available. I believe this alarming number could rise to 13 seekers per room given a number of landlords could decide to move out of the property market.
George Osbourne recently quoted ‘First, we will create a more level playing-field between those buying a home to let, and those who are buying a home to live in’. In my opinion, this tax-relief change is in fact detrimental to the first time buyers. If we take into account the reasons I highlighted above, first time buyers will find it harder to save a deposit.
I strongly encourage all private landlords to start evaluating the impact of the tax changes now and have enclosed a simple calculator from our official partner, the RLA. This will help landlords assess the impact of the tax-relief changes on their income.
EasyRoommate.co.uk is the world’s number one flat share and house share website. Running for over 10 years, it operates in 25 countries across the world, in eight different languages. It has over 50,000 rooms to rent worldwide and a 100,000+ strong community of potential tenants.
About the research:
Research included a consumer poll with 464 EasyRoommate landlords.
For more information please contact:
Head of Global Marketing
Email: [email protected]
About Karim Goudiaby, Chief Executive Officer of EasyRoommate
In 2002, Karim joined the EasyRoommate team then located in the New York offices. He began his web journey as an ambitious, driven and passionate intern. He re-joined the team a few years after graduating and was instrumental in establishing the company’s global offices and developing EasyRoommate’s online presence.
Karim has an in depth knowledge of the property and shared accommodation market, and he is dedicated to bringing benefits to consumers through extensive web services, which meet the needs of lifestyle demands and connect people, locally and globally.
Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact
The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising strategy in the face of covid-19”, a survey run by the Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank.
The results show that treasurers are looking to diversify their investments in a bid to mitigate the pandemic impacts, including heightened liquidity, foreign-exchange and interest-rate risk. As many as 55% plan to increase investments in long-term instruments, with 48% increasing investments in bank deposits, another 48% in local investment products, and 47% in money-market funds.
“The Covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage,” says Melanie Noronha, the EIU editor of the report.
Despite Covid-19 looming large, other challenges wait in the wings. Notably, the replacement of the London Interbank Offered Rate was identified by 38% of respondents as the main challenge of their function.
Technology, meanwhile, continues to be a pressing issue, with treasury teams becoming increasingly reliant on IT solutions. Here, data quality is rising up the list of concerns. Already highlighted as very or somewhat concerning in 2019 by 69% of respondents, the figure rose to 78% in 2020. Acquiring the necessary skill sets to realise the full benefits of this data and technology is also a continuing priority – with some progress registered from last year. In 2020, 30% of respondents say they have all the skills they need to manage technological change, up from 22% in 2018.
“Treasury’s focus on technology is not only helping teams operate more efficiently in a remote-working environment, it has long played – and continues to play – a key role in realising their long-term priorities,” notes Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank. The survey shows that
Release 1 | 2 managing relationships with banks and suppliers (highlighted by 32% of respondents) and collaborating with other functions of the business (also 32%) remain top of the agenda – and seamless digital systems will help give treasurers the bandwidth and insight to be more effective partners for both internal and external stakeholders.
Based on a global survey of 300 treasury executives, conducted between April and May, the survey explores stakeholders’ attitudes among corporate treasurers towards the drivers of strategic change in the treasury function – from the pandemic through to regulation and technology – and their priorities for the next five years.
Digital collaboration: Shaping the Future of Finance
By Ryan Lester, Senior Director of Customer Experience Technologies at LogMeIn
With heightened economic uncertainty and increased customer expectation becoming the norm in the banking industry, it is understandable that the sector is struggling to keep afloat. Due to its precarious nature, banking institutions are trying their best to ensure they remain relevant in the competitive landscape and guarantee that their customers continue to be a priority.
When it comes to the first half of this year, the pandemic has shown how easy it is for industries to fail. Customers and companies alike had to get used to the new normal, as physical locations started to close. The banking industry felt this first hand, as banks were made to restructure how their business ran, with restricted opening hours and a wider push to motivate people to use online banking.
While some had already embraced digital options prior to the pandemic, this proved to be a stark contrast to the elderly population, who frequently visited branches to access their finances. Moving forward, banks have to adopt new methods to ensure customers get the most out of our their accounts, without their experience suffering.
Heightened Customer Expectations
When the pandemic reached its peak, people were encouraged to use online banking, as telephone contact was under strain with long waiting times and pressure mounting on contact centre agents. According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%.
With branches remaining closed, customers were continuously being urged to limit the amount of calls they made to the most urgent cases and consider whether they could solve their answers through mobile online banking or checking the company website. Although already being adopted in pockets of the industry, this was a real catalyst that spurred banks to up their game on digital channels and with self-service tools.
Banks are challenged with precariously balancing customer needs with the cost of personalised support. With the demographic of customers changing over the last few years, customers are becoming increasingly younger and more comfortable with technology. Influenced by the “Amazon Effect”, their expectations have raised to an all-time high, placing record strain on the sector
Customer experience isn’t just about support anymore, it’s about serving your customer at every point in the journey. Companies have an opportunity to elevate the experience they provide by moving beyond one-and-done interactions to create continuous engagements with their customers. It is starting to become a primary competitive differentiator in the market and one that doesn’t have a lot of variation. Deploying AI chatbot technology will be able to strategically help banks improve customer experience and raise the level of support that agents provide.
Digital collaboration: Working around the Clock
The benefits of adopting digital channels and self-service tools are second to none. By implementing chatbots, fuelled by conversational AI, banks will be able to help serve a wide range of customer queries and ensure they are protected from fraud and scams.
Conversational AI is exactly what it sounds like: a computer programme that engages in a conversation with a human. When it comes to service delivery, conversational AI can be deployed across multiple channels to engage with customers in ways that effectively address evolving customer needs. At a time defined by COVID-19, self-service tools such a conversational chatbots can work around the clock to solve customer queries in a concise and timely way. Of course, self-service tools won’t completely replace human agents in the banking industry, but they will help companies re-distribute customer traffic and workflows in ways that enhance customer experience. Self-service tools fuelled by conversational AI can also improve employee experience because service employees can handle fewer, but higher-level service tasks that chatbots might escalate to them.
Adopting new tools to help facilitate consistent and concise answers and help maintain customer experience is on the forefront of many industry minds. Banks such as the Natwest Group have seen this first-hand and are testament to the benefits that a good digital experience can provide. Simon Johnson, Capability Consultant, Digital at NatWest Group highlights NatWest’s use of digital tools during lockdown, “Over the last few months, we’ve learnt how to use digital tools to help our employees remotely. From a banking perspective, there have been a lot of changes including base rates, waive fees and the best ways of contacting our vulnerable customers, ensuring we keep them protected from frauds and scams.
“By introducing our Bold360 chatbot interface, Ella, we’ve been able to get relevant information out quickly, apply the best practice and ensure that our customer journeys are being developed correctly. Due to the volume of questions, some of our customers were finding themselves waiting longer than usual. So digital channels become essential to helping reduce the wait time. Using Bold360, we were able to mitigate issues and answer questions in a more timely way through our chatbot.
“Moving forward, as we open more digital services, we are analysing our data to see if customer will return back to their usual way of banking, now that they’ve seen what a good digital experience can provide. Either way, with Ella, we are ready.”
Chatbots and Humans: The Best Option for Customer Service
Over the last year, banking institutions have recognised the power that digital collaboration can have to their success. Delivering exceptional customer service and support is key for any business wanting to stay competitive in today’s market and banks are especially challenged with precariously balancing customer needs with the cost of personalised support. Leveraging the right technology, such as AI-powered chatbots, will enable the banking industry to provide better support and a more robust customer experience in the long term. Other institutions must follow suit, or risk becoming obsolete.
A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US
By Lauren Jones, International Payments Ambassador, Icon Solutions
The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.
Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?
- Real-time payments – the stimulus for change
Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.
Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.
This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.
Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.
- The kids are growing up
The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.
Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.
Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.
Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.
- Checkmate? Evolving corporate requirements
Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.
The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.
- Increasing competition
A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.
Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.
For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.
Taking customer propositions to the next level
Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.
By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation
Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds
Tangerine Bank Ranks Highest in Overall Credit Card Customer Satisfaction for Second Consecutive Year With 73% of credit card customers...
The benefits of automated pension plans
While many people will prefer to speak to fellow human beings when discussing their investments, automation is already part of...
Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact
The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising...
Boost for consumers as banks recognise room for improvement on service and delivery
42% of banks are looking to improve service provision and boost customer satisfaction in the year ahead Less than half...
By Paddy Osborn, Academic Dean, London Academy of Trading Whether you’re negotiating a business deal, playing a sport or trading...
The impact of the Accounts Payable risk landscape
By David Thorley, Director of Customer Development, FISCAL Technologies The current economic climate has never been so uncertain. Not since...
The Viral Return On Investment
By Sabine Saadeh Author of Trading Love Investment Pitch It was around August 2018 when a friend of mine approached...
How AI and ML are changing insurance for good
By Alan O’Loughlin, Director of Analytics and Statistical Modelling, International and John Beal, Senior Vice President of Analytics at LexisNexis®...
How Assistive Learning Technology Is Making Online Learning Inclusive
By Sandra Goger is Learning Technology Analyst at Iflexion, Denver-based software development company. The global online learning market is expected...
Can your company data make you famous?
By Kerry Gould, Associate Director, Speed Communications Businesses gather and generate reams of data every day on everything from purchasing...