It’s a complex time to be a private landlord, but we can help you understand the various regulations you’ll need to be aware of when investing in buy-to-let and managing your portfolio. If in doubt when renting your property, we strongly advise you to use a reputable, qualified Property Manager.
Being a private Landlord during COVID-19
Temporary rules introduced during the COVID-19 pandemic for Covid-19 evictions, meaning landlords must now give longer notice periods when starting eviction proceedings against their tenants. In England this is six months’ notice, except from in the most extreme circumstances, such as when a tenant is proven to have demonstrated anti-social behaviour, committed fraud, or as is at least six months in rent arrears. This rule will apply until 31 March.
Section 21 changes
The government consulted on abolishing Section 21 – a clause which allows landlords to end ‘rolling’ tenancies with two months’ notice without giving a reason for doing so. At the moment, Section 21 remains in place with delays for an indefinite period due to the COVID-19 pandemic. This may change this year, so we will keep an eye on it. Other proposals are to include replacing security deposits with a ‘lifetime deposit’ that moves with the tenant, and making a rogue landlord database publicly available.
Mortgage Payment Holidays
If you’re struggling to pay your mortgage or your tenant is having problems paying their rent due to COVID-19, you can apply for a payment holiday on your mortgage until 31 March. The rules are as follows: If you haven’t taken a payment holiday since the start of the pandemic, you can apply for deferrals of up to six months in total. If you currently have your first deferral in place or have resumed payments after one deferral, you can apply for another one to take you up to the six-month limit. If you’ve already had six months’ worth of deferrals, you won’t be eligible for further payment holidays and will need to seek alternative support from your lender.
Stamp Duty Holiday
Landlords can benefit from the current stamp duty cut when buying investment properties only until 31 March. In England, landlords still need to pay a 3% surcharge, albeit on the temporarily lower stamp duty rates. This means you’ll need to pay a flat rate of 3% on purchases up to £500,000.
Stamp Duty Surcharge
From 1 April, overseas investors will need to pay a 2% stamp duty surcharge when they purchase properties in England. This is on top of the regular buy-to-let surcharge. The rules apply to all non-UK residents.
Brexit
The UK has now agreed a deal with the European Union. With the finer details yet to be applied in practice, there could be some further bumps in the road. If the recent economic uncertainty continues, we might see changes to interest rates. This would then have an impact on the the cost of buy-to-let mortgages.
Tenant’s Right to Rent
Currently, landlords/agents need to check all tenants have the right to live in the UK before letting them move in to a property. Landlords/Agents have been encouraged to use the current system of accepting passports and photo identification cards until 30 June, but it’s unclear how Right to Rent will work after this date.
Tax Returns
The deadline Sunday 31 January marks the deadline for your online self-assessment tax return for the 2019-2020 tax year. Some self-employed workers who owe less than £30,000 in tax can qualify to spread the cost of their bill using the government’s Time to Pay scheme.
Capital Gains Tax on the private landlord
The government is currently reviewing the capital gains tax (CGT) system, and any changes could have a significant effect on landlords selling their investment properties. In November, the Office for Tax Simplification made 11 recommendations for CGT changes, including making rates ‘more closely aligned’ with income tax rates or reducing the CGT-free allowance. The government is currently reviewing these recommendations. It’s unlikely any wholesale changes will happen soon, but this is one to keep an eye on in 2021.
Mortgage Interest Tax Relief for private landlords
When you file your 2019-20 tax return this month, you’ll be able to deduct 25% of your mortgage interest and get a 20% credit on the remaining 75%. But from your next tax return (due in January 2022 for the 2020-21 tax year), you’ll instead just get the 20% credit on all your mortgage interest.
Client Money Protection
These rules apply if you use a managing agent to let out your properties in England, they’ll need to adhere to new client money protection rules from April. Agents must sign up to one of the government’s six approved schemes and hold money in accounts registered with the Financial Conduct Authority. Those who fail to join a scheme could face fines of up to £30,000
Buy-to-let and Electrical Safety
New electrical safety rules mean private landlords will need to ensure all electrical installations in their property are inspected and tested every five years. Tenants must be provided with a copy of the test report within 28 days (or before occupation for new tenants). From 1 April 2021 existing tenancies must follow the regulations too.
If in doubt about your buy to let Landlord responsibilities, we highly recommend you use a qualified Property Manager. Getting it wrong, can be a very costly mistake.
At PIIM Property, we pride ourselves on keeping up-to-date with the legalities of managing properties in the UK, and are happy to advise. There are numerous reasons for instructing a professional letting company see ‘Why Landlords should use a Letting Agent to manage their portfolio‘.