Buy to Let Landlord 2020 Rule Changes

2020 will see a lot of changes to legislation which will affect you as a landlord. Daunting though some of them may seem, this information will help you plan and prepare, enabling you to continue reaping the benefits of your property investments for years to come!

Buy to Let Landlord 2020 Rule Changes

2020 will see a lot of changes to legislation which will affect you as a landlord. Daunting though some of them may seem, this information will help you plan and prepare, enabling you to continue reaping the benefits of your property investments for years to come!

Tax Relief

April 2020 will see the fourth and final stage of the buy to let tax relief changes coming into force. Before April 2017, you, as a landlord, could deduct 100% of your expenses (for things such as buildings insurance, repairs, utility costs and mortgage interest) from your rental income before tax. Since 2017, the claimable amount for finance costs (including interest) has been stepped down by 25% per year, meaning that from April 6th 2020, you will no longer be able to claim anything, but will instead receive a 20% tax credit on interest payments. (NB all other costs are unaffected).

EPC Ratings

Most properties that have been rented or sold in the last ten years are likely to have required an Energy Performance Certificate (EPC) to do so. Currently, all buy to let properties let on an assured tenancy, regulated tenancy or domestic agricultural tenancy are legally required to have an EPC too.

Since April 2018, your buy to let properties require a minimum EPC rating of ‘E’ for all new tenancies or tenancy renewals. As of April 2020, this requirement will be extended to all existing tenancies, meaning that all rental properties will require a rating of E or higher in order to comply with the regulations and be deemed ‘rentable’.

Should one or more of your properties have an EPC rating of F or G, you will be required to do essential works to meet the minimum E rating. While this may seem financially daunting, the regulations cost cap means that you will not be required to spend more than £3,500, including VAT. If £3,500 is not enough to achieve the property an E rating, then you must do everything you can up to that value and then register an ‘all improvements made’ exemption.

The Government has set out a long-term plan to improve the energy efficiency standards of rented property in England and Wales. Their target is to upgrade properties to an EPC rating of ‘C’ by 2030, ‘where practical, cost-effective and affordable’. We are expecting another staggered approach to be launched by the Government to achieve this aim. 

If you own buy to let properties in Scotland, you have set a target of a required EPC ‘D’ rating by 2025, with ‘C’ ratings to follow in 2030.

HMO Licencing & Planning
The rules around House in Multiple Occupancy (HMO) licenses and planning permissions can seem quite complicated, as they tend to vary depending on the local authority of the property.

Some local authorities are implementing the recent Article 4 Directions, which include some significant changes to the permitted developments rights concerning HMOs, that could have financial implications if you are looking to buy an HMO or convert an existing property into one.

Previously, planning rules allowed landlords and developers to convert a family home into a small HMO (up to four unrelated occupants) without planning permission. If adopted by your relevant local authority, Article 4 Directions necessitate that all new HMOs in that area require planning permission, regardless of their size.

As council requirements differ from council to council, we always recommend contacting your relevant local authority to find out about their regulations on HMO licensing and planning regulations to ensure you are fully compliant with their requirements.

Capital Gains Tax

Currently, Private Residence Relief (PRR) provides a useful exemption from Capital Gains Tax (CGT); landlords can claim for PRR for all the time they lived in the property before it was let, plus the first 18 months after they moved out.

As of April 2020, the additional 18-month allowance will be reduced to just nine months, meaning landlords will lose nine months’ worth of CGT relief when they come to sell, as the amount of the total gains that is exempt is calculated on a time apportionment basis.

Furthermore, where CGT relief of up to £40,000 (£80,000 for a couple) is currently available to those who let out a property that is or has been their home, come April this will be restricted to landlords who are in shared occupancy with their tenant(s).

Finally, it’s important to be aware of the deadline change for CGT bills that is coming soon. Under the current system, you pay the CGT bill by January 31st, in the year after the tax year that you sell your house; however, as of April 2020 you will be required to submit your CGT bill within 30-days of completion – quite a difference!

Don’t forget... as a mortgage broker, we can provide you with general updates on tax and regulation changes, but we are unable to give any individual tax advice, and we always recommend speaking to an accountant or tax advisor.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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