2020 could well bring an overhaul in regulations affecting York landlords, which they’ll have to be aware of if they’re thinking of investing in a buy-to let or are already renting out properties.
Consumer advice experts at Which? have come up with some top tips to watch out for this year, and we’ve added a few of our own to ensure local landlords stay on the right side of the law:
Mortgage interest tax relief changes
The government has been phasing out tax relief on mortgage interest since April 2017, with the proportion you’re allowed to deduct slowly being reduced each tax year. This will come to a head in April, at the start of the 2020-21 tax year. From then, you’ll only be able to subtract a flat credit of 20% of your mortgage expenses from your rental income when filing your tax return.
Energy efficiency rules
From April 2020, more landlords will need to meet the new Minimum Energy Efficiency Standard (MEES) regulations, which require rented homes to have a minimum Energy Performance Certificate (EPC) rating of E. Landlords with properties that don’t meet the regulations must carry out energy efficiency measures on their homes, up to a cap of £3,500 a property. The rules were first introduced in 2018, but originally only covered new tenancies and renewals. From April, however, they’ll apply to all existing tenancies.
Section 21 evictions
‘No fault’ evictions were a major topic of debate towards the end of 2019, with the government consulting on repealing Section 21 of the Housing Act. Section 21 allows landlords to end a tenancy without giving any reason for doing so. The government believes repealing Section 21 will offer tenants greater security, but landlords fear the proposed changes could mean they have to take troublesome tenants to court to repossess homes. The consultation is now closed and its findings under review.
Keep an eye on local licensing
Some councils operate additional or selective schemes but York City Council does not currently do so. Landlords operating Houses in Multiple Occupation (HMOs) should comply with licensing rules adopted in October 2018. For details about York City Council’s HMO policy, click here.
Changes to private residence relief
An overhaul of property residence relief rules could hit smaller landlords with higher capital gains tax bills when they sell their property. Currently, you can claim up to £40,000 in capital gains tax relief if you let a property that is, or has been, your main home – even if you haven’t lived in it for a long time. Form April, this loophole will be closed, and landlords will need to actually be living in the property at the time of the sale to claim the relief.
In July 2018, the government announced plans to make landlords carry out electrical safety checks on their homes every five years. So far, however, it has yet to set a start date for these checks to be introduced. This could happen in 2020, but it’s likely that landlords and managing agents will be given at least six months’ notice before implementation. After implementation, a two-year transitional period will apply, with new tenancies being brought under the regulations first, followed by existing tenancies a year later. Letters already insist landlords carry out these checks as good practice.
Client money protection schemes
New rules introduced in April 2019 mean that all letting agents in England must belong to a client money protection scheme. This provides insurance to landlords and tenants alike against malpractice from agents. Letters hold all deposits in a bonded client account in accordance with government regulations, so it is protected both during and after the tenancy.
Stamp duty has been towards the top of the list of landlord gripes since 2016, when the government introduced a 3% buy-to-let stamp duty surcharge for property investors. It is speculated that a new stamp duty surcharge could be brought in for foreign buyers investing in UK property. Whatever happens, stamp duty is always an area of political interest and is certainly something landlords should keep an eye on.
Research local house prices before investing
UK prices are slowing, with a latest increase of just 1.3% year-on-year, according to the Land Registry – but York is one of the few cities to outperform this trend. Research by Savills found York is the county’s top performer in terms of house price increases – up 46.1% in the last decade. It’s making it harder for those struggling to get into the property ladder but is good news for local landlords.
Buy-to-let mortgage rates fell steadily over the course of 2019, to reach an average of 3% in December. With the price war between lenders likely to continue early in 2020, it’s a great opportunity to consider refinancing your portfolio and lock in a great rate. Which? advises buyers to always price up the full cost of the deal rather than focusing on the initial rate and any incentives such as cashback. For example, cashback of £1,000 might sound great on paper but set against a large upfront fee or higher interest rate it’ll quickly lose any attraction.
New trade body for landlords
The letting sector’s largest ever trade body is set to launch this month, with the aim of delivering a stronger voice for landlords in the private rented sector. The National Residential Landlords Association (NRLA) will have a membership of more than 80,000 landlords, thanks to the merging of the National Landlords Association and the Residential Landlords Association.
The economy, Brexit and government intervention
Last but certainly not least, landlords will need to ready themselves for more economic peaks and troughs in 2020. Depending on the outcome of Brexit, the Bank of England base rate could shift in either direction, having an effect on mortgage rates. In addition, any further economic uncertainty could mean this slower property market continues through 2020. And with a new government sure to impose its own plans on the buy-to-let industry, it’s more important than ever for landlords to keep an eye on the latest developments.
The Letters team is always happy to speak to landlords and prospective landlords about any concerns or queries they have. Please contact us for an informal chat.