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What Should Buy-To-Let Landlords Be Looking Out For Now – And Particularly Before The End Of The Tax Year?

The rest of 2021 is likely to bring more uncertainty to the letting and management of residential property - so how can landlords best prepare? Here are our top ten tips:

1)       Possession:

Bailiff-enforced evictions by private residential landlords in England cannot happen until 31st March 2021 at the earliest - and not usually without giving at least six months’ notice. However, cases involving anti-social behaviour, fraud, trespassing or substantial rent arrears – previously of nine but now six months and which don’t need to have been accumulated before March 2020 - can proceed earlier. A backlog of cases, the possibility of tenants self-isolating and the government’s “Debt Relief/Breathing Space” scheme for tenants in genuine need may mean further delays.

2)     Stamp Duty:

Landlords in England can save up to £15,000 in stamp duty when buying investment property up to 31st March this year but st​​​​​​​ill n​​​​​​​eed to p​​​​​​​a​​​​​​​y a 3% surcharge on a temporally lower stamp duty rate of 3% for purchases up to £500,000. A 2%​​​​​​​ surcharg​​​​​​​e for n​​​​​​​on-U​​​​​​​K r​​​​​​​esid​​​​​​​ents applies from April ​​​​​​​1 when purchasing properties in England and Wales on top of the regular buy to let surcharge.  To be classified as a UK r​​​​​​​esi​​​​​​​dent, buyers need to have spent at least 130 and 83 days or six months in the UK during the year before​​​​​​​ or the year after the property is purchased.​​​​​​​

3)     Right to Rent:

Landlords need to check all tenants enjoy the right to live in the UK before letting them move into a property but this could change in 2021 post Brexit. Landlords have been encouraged to use the current system of accepting passport and photo ID cards until at least 30th June but it's unclear how the system will oper​​​​​​​ate afterwards.

4)      Capital Gains Tax:

This is ​​​​​​​presently applied at 18% for basic rate and 28% for higher rate taxpayers selling in​​​​​​​vest​​​​​​​ment propert​​​​​​​y but profits c​​​​​​​​​​​​​​a​​​​​​​n​​​​​​​ b​​​​​​​e off​​​​​​​​​​​​​​set against an annual allowance of £12,300 in the 2020/21 tax year a​​​​​​​nd £24,600 for jointly-owned assets. However,a government review of CGT prompted record numbers of landlords to set up limited companies subject to corporation tax at 19% not higher rates of individual tax.
5)      Abolition of Section 21 Notices:

The Renters Reform Bill, which would stop landlords ending tenancies by giving two months’ notice without reason and may also include replacing security deposits with lifetime deposits, could be introduced in the summer of 2021 bearing in mind significant cross-party support.

6)   Electrical Safety Rules:

Landlords and agents must ensure electrical wiring and fixed electrical installations, sockets, fuse boxes etc are inspected and tested at least every five years otherwise face fines of up to £30,000 if defects are not addressed within 28 days.Tenants have to be provided with a copy of the report within 28 days or before occupation which must also be given to the local authority if requested. New tenancies have been subject to these rules since June last year but will apply to existing tenancies from 1st April 2021.

7) Mortgage Interest Tax Relief:

When filing 2019/20 tax returns last January landlords were able to deduct 25% of mortgage interest against rental income and receive 20% credit on the remaining 75%. However, for their next tax due in January 2022 in respect of the 2021 tax year, landlords will instead just receive 20% credit on all mortgage interest.

8) Client Money Protection:  ​​​​​​​

Managing agents in England need to adhere to new rules from April by signing up to one of the government’s app​​​​​​​roved schemes as well as holding money and accounts registered with the Financial Conduct Authority otherwis​​​​​​​e face fines of up to £30,000.

9) Pet-Friendly Tenancies:

The government have updated their Model Tenancy Agreement template to enable renters to keep pets. Landlords will no longer be able to issue blanket bans on pets or adjust the cap on deposits and will have to object in writing within 28 days of a tenant’s written request and provide a good reason such as the property’s unsuitability. On the other hand, tenants will still have a legal duty to repair or cover the costs of any damage.

10) End of Mortgage Holidays:

Landlords struggling to pay mortgages if tenants can’t meet their rental obligations can apply to defer payments for up to 6 months until 31st July but applications must be submitted before 31 March. Interest will still accrue and be added to the total outstanding!

Most landlords regard buy to let as a long term investment although the last twelve months have tested the patience of many. If they can weather the storms of the next six months then 2022 is looking more promising as the vaccine roll out continues and the economy recovers – especially if taking advantage of the 30 plus years of market knowledge and experience of agents like Jeremy Leaf & Co!