10 Important Landlord Regulation Changes For 2020
Wed 15 Jan 2020
Beth Bromilow, Valuations & Marketing Support
Keeping yourself up to date with various changes that impact you as a landlord can be difficult. If you don’t know to search for something you may not know it’s coming.
Below we’ve gathered the main points for 2020 that could impact your tenancies this year.
1. We say goodbye to the last of the Landlord Income Tax relief
While we knew it had been coming, the last quarter of tax relief will be removed in April 2020.
Previously you had been able to reduce the tax you incurred on your rental income by offsetting it against interest incurred through mortgage and loan interest relating to the properties. This offset has been phased out incrementally over the last few years.
Going forward from April this year, you will now instead incur a basic rate of tax against all your rental income of 20%.
This doesn’t sound good on the face of it however you should seek financial advice regarding these changes. While all rental income will fall under the basic income tax rate, there will be the option to claim back 20% in tax credit. This means the impact on your income may not be as much as you suspect, certainly if your property portfolio is small.
2. You will need to be able to prove your property’s wiring is safe
In previous years, while you had a duty of care to provide a safe environment for your tenants, you weren’t required to have documentation proving this.
From April laws will require your property to have an Electrical Installation Condition Report (EICR). This report already exists however it was only legally required for non-residential properties or HMOs.
You may already be familiar with EICRs as it has been considered best practice to have them completed for all properties anyway. If you have been then you’re all set for the coming changes. If you haven’t, then you need to know the timescales:
3. How energy efficient is your property?
In a world where we try to be greener, your properties Minimum Energy Efficiency Standard rating may no longer just be a selling point, it’s a requirement.
This had, for the last two years, been a requirement for new tenancies. From April it will now apply to your existing tenancies as well.
For most new build properties you’re likely to find this change will not impact you as most new builds are built to high energy standards anyway. If you’re renting out an older property you may find this could impact you, however.
You’ll need to make sure they meet an EPC rating of E. While there are possible exemptions to these new rules (for example if the changes to improve your EPC rating were to cost you more than £3500) if your property is an F or G you will be provided with a list of work to be completed to continue renting the property.
4. No-fault evictions are no longer an option
In 2019 a discussion was started on whether Section 21 should remain. By the end of 2019 during the Queen’s speech, it was announced that Section 21 will be abolished as part of the renter’s reform bill.
This sounds like a large loss of control for you as a landlord as there will be times when you need to have your property fully back in your possession.
To that effect though, while Section 21 is being abolished, the court system is also being overhauled to make it an easier and quicker process when required.
The result will be tenants are better protected from suddenly becoming homeless but the Landlord is still able to reacquire their property for legitimate reasons.
5. When did you last check your existing tenancies?
Typically when you prepare a property for a new lease you will make it more desirable by ensuring it is in a fit state for someone to live in. Last March it became a requirement of new tenancies that they are in a fit state for habitation before the new lease could start.
From March 2020 though you’ll need to consider your existing tenants as well as part of the Fitness for Human Habitation Act. When was the last time you checked on that tenant that’s been with you for three years for example? Well from March you’re going to have to make sure that anything not up to scratch in the property is rectified.
6. Changes to Capital Gains Tax
No one is going to like the idea that taxes are changing, so to ease the sting on this one Capital Gains Tax (CGT) is not increasing. It’s also not decreasing, unfortunately.
In previous years if you sold a property that wasn’t your main residence, the tax you would have to pay on the sale of the property could wait until you completed your self-assessment tax return.
From April 2020 however, the taxes will have to be paid within 30 days of the sale completing. So while the rates are not changing currently, landlords need to be wary if they are planning on making changes to their property portfolio.
7. Do you own UK property but are based abroad?
Changes to stamp duty are coming aimed at levelling the playing field for UK based landlords.
If you’re a UK based tax resident then you’re already required to pay an extra 3% stamp duty on additional properties. This has been the case since 2016.
This is now being extended to include non-UK tax residents. While this sounds like a welcome move if you’re based in the UK, there is no official date on when this is happening, only that it’s planned for 2020.
8. Extension of the Tenant Fee Ban
You may have already been impacted by the change which came in effect last year:
9. Money Laundering Regulations for Letting Agents
As a landlord, this won’t directly impact you but you should be aware that it is happening in the background as it may have an impact if you look to change letting agent at some point.
Letting agents from January 2020 who manage properties with a monthly income of €10,000 must conduct Customer Due Diligence checks as part of the European Fifth Money Laundering Directive. This is carried out on the Landlord and the Tenant of a new tenancy.
In May 2020 letting agents will need to register with HMRC if they meet the requirements and perform these checks.
For existing tenancies, this won’t have an impact until they are renewed.
10. And finally we end on, Brexit eventually happened
It’s been many years of uncertainty but we are now past wondering if Brexit would even happen.
Now we’re just left with working out how it is actually going to impact us through this year and beyond.
If you can predict what will happen you can make a tidy sum at the local bookies, for the rest of us though we can’t do much more than sit and wait to see how the departure from the EU may impact the property market.
It is pure conjecture as to what may happen, but a couple of examples of what you might want to consider:
Below we’ve gathered the main points for 2020 that could impact your tenancies this year.
1. We say goodbye to the last of the Landlord Income Tax relief
While we knew it had been coming, the last quarter of tax relief will be removed in April 2020.Previously you had been able to reduce the tax you incurred on your rental income by offsetting it against interest incurred through mortgage and loan interest relating to the properties. This offset has been phased out incrementally over the last few years.
Going forward from April this year, you will now instead incur a basic rate of tax against all your rental income of 20%.
This doesn’t sound good on the face of it however you should seek financial advice regarding these changes. While all rental income will fall under the basic income tax rate, there will be the option to claim back 20% in tax credit. This means the impact on your income may not be as much as you suspect, certainly if your property portfolio is small.
2. You will need to be able to prove your property’s wiring is safe
In previous years, while you had a duty of care to provide a safe environment for your tenants, you weren’t required to have documentation proving this.From April laws will require your property to have an Electrical Installation Condition Report (EICR). This report already exists however it was only legally required for non-residential properties or HMOs.
You may already be familiar with EICRs as it has been considered best practice to have them completed for all properties anyway. If you have been then you’re all set for the coming changes. If you haven’t, then you need to know the timescales:
- 1st April 2020 the Regulation is in place
- 1st July you can no longer start a new tenancy without an EICR in place
- 1st April 2021 all existing tenancies must have an EICR in place
3. How energy efficient is your property?
In a world where we try to be greener, your properties Minimum Energy Efficiency Standard rating may no longer just be a selling point, it’s a requirement.
This had, for the last two years, been a requirement for new tenancies. From April it will now apply to your existing tenancies as well.
For most new build properties you’re likely to find this change will not impact you as most new builds are built to high energy standards anyway. If you’re renting out an older property you may find this could impact you, however.
You’ll need to make sure they meet an EPC rating of E. While there are possible exemptions to these new rules (for example if the changes to improve your EPC rating were to cost you more than £3500) if your property is an F or G you will be provided with a list of work to be completed to continue renting the property.
4. No-fault evictions are no longer an option
In 2019 a discussion was started on whether Section 21 should remain. By the end of 2019 during the Queen’s speech, it was announced that Section 21 will be abolished as part of the renter’s reform bill.
This sounds like a large loss of control for you as a landlord as there will be times when you need to have your property fully back in your possession.
To that effect though, while Section 21 is being abolished, the court system is also being overhauled to make it an easier and quicker process when required.
The result will be tenants are better protected from suddenly becoming homeless but the Landlord is still able to reacquire their property for legitimate reasons.
5. When did you last check your existing tenancies?
Typically when you prepare a property for a new lease you will make it more desirable by ensuring it is in a fit state for someone to live in. Last March it became a requirement of new tenancies that they are in a fit state for habitation before the new lease could start.
From March 2020 though you’ll need to consider your existing tenants as well as part of the Fitness for Human Habitation Act. When was the last time you checked on that tenant that’s been with you for three years for example? Well from March you’re going to have to make sure that anything not up to scratch in the property is rectified.
6. Changes to Capital Gains Tax
No one is going to like the idea that taxes are changing, so to ease the sting on this one Capital Gains Tax (CGT) is not increasing. It’s also not decreasing, unfortunately.
In previous years if you sold a property that wasn’t your main residence, the tax you would have to pay on the sale of the property could wait until you completed your self-assessment tax return.
From April 2020 however, the taxes will have to be paid within 30 days of the sale completing. So while the rates are not changing currently, landlords need to be wary if they are planning on making changes to their property portfolio.
7. Do you own UK property but are based abroad?
Changes to stamp duty are coming aimed at levelling the playing field for UK based landlords.
If you’re a UK based tax resident then you’re already required to pay an extra 3% stamp duty on additional properties. This has been the case since 2016.
This is now being extended to include non-UK tax residents. While this sounds like a welcome move if you’re based in the UK, there is no official date on when this is happening, only that it’s planned for 2020.
8. Extension of the Tenant Fee Ban
You may have already been impacted by the change which came in effect last year:
- No longer being able to pass letting fees onto tenants.
- It also capped how large a deposit could be, at five weeks rent for smaller properties, and six weeks if the annual rent was over £50,000
- You can no longer ask for additional deposit to cover pets.
9. Money Laundering Regulations for Letting Agents
As a landlord, this won’t directly impact you but you should be aware that it is happening in the background as it may have an impact if you look to change letting agent at some point.
Letting agents from January 2020 who manage properties with a monthly income of €10,000 must conduct Customer Due Diligence checks as part of the European Fifth Money Laundering Directive. This is carried out on the Landlord and the Tenant of a new tenancy.
In May 2020 letting agents will need to register with HMRC if they meet the requirements and perform these checks.
For existing tenancies, this won’t have an impact until they are renewed.
10. And finally we end on, Brexit eventually happened
It’s been many years of uncertainty but we are now past wondering if Brexit would even happen.
Now we’re just left with working out how it is actually going to impact us through this year and beyond.
If you can predict what will happen you can make a tidy sum at the local bookies, for the rest of us though we can’t do much more than sit and wait to see how the departure from the EU may impact the property market.
It is pure conjecture as to what may happen, but a couple of examples of what you might want to consider:
- The Bank of England increasing its base rate in an effort to maintain inflation and the pound. How will that impact the interest on your buy-to-lets.
- If the right to work for EU nationals doesn’t end up as planned, could we see many EU tenants having to give notice?
If you are thinking of Selling or Letting, start by giving us a call and speak to one of our local experts.
Alternatively, feel free to email me directly: Beth@MarkAntonyEstates.com - in the meantime, all the best!
p.s. Are you curious what your rental property could be worth? Find out in around 53 seconds. Click here.
p.p.s. Download our eBook on how to get the best selling price for your property by clicking here.