2020 is here, and like just about everyone else landlords in the UK are pensive about a number of things that have been taking place in the UK as well as the world. So what exactly does the year have in store for UK?s landlords?
Legislative Changes Impacting UK’s Landlords
Legislations pertaining to tenant and landlord situations in the UK have changed and this is causing a shift in the industry. The property landscape is therefore expected to take on a new look by the end of the year.
One of the changes pertains to tax relief. This change essentially eliminates the ability of landlords to claim tax relief based on mortgage payments. Instead, they benefit from a 20% tax credit based on interest payments. This will naturally result in a lower rate of tax relief and as a result cause landlords to fork out more of their income as tax payments.
Energy Efficiency Requirement
Regulations pertaining to the energy efficiency state of rental properties have also been changing for the past few years. These changes have generally reflected a drive to get properties to develop higher standards of energy efficiency. As of 2018 all-new rental properties and all properties that were taking on new tenants were required to attain a rating of at least E after being assessed for the Energy Performance Certificate (EPC).
In 2020, the regulation was adjusted again, this time it resulted in an expansion in the categories of properties to which the regulation applies. Since ratings of F and G will cause properties to be declared unrentable, landlords must make adjustments or lose that earning potential. This could see landlords forking out up to £3500 as to meet the minimum standard.
2020 has also seen a restriction in the Private Residence Relief sum that landlords can claim. Previously they could claim for the time they lived on the property before letting it and then an additional 18 months after moving out but a 2020 adjustment resulted in the removal of the additional 18 month period. Additional changes in legislation resulted in restrictions on including admin fees in rent prices.
Since the new regulations came into effect, landlords have been experiencing a downturn in business with income declines starting in 2019 and continuing through to 2020. Projections indicate that this trend will continue at least for the short term.
How Landlords Have Been Responding to the Changes
These changes, along with other factors such as increasing rental expenditure, economic uncertainty and the slow pace at which house prices are increasing, have prompted some landlords to implement rent increases. Others are opting to downsize their property portfolios or eliminate them altogether by putting them up for sale. But selling a property can take some time. And historically this process could be relatively complicated, especially when the property in question is a rental one and/or tenanted at the time when it is put up for sale.
Landlords who feel overwhelmed by these legislative changes may well opt-out of the industry by finding alternate uses for their properties or taking up lucrative offers presented by specialist UK companies that can help you sell your house fast, despite it being tenanted or vacant.
If selling isn’t on the agenda, Which.co.uk have put together 6 strategies UK landlords can adopt to make 2020 more profitable for their property portfolio. Including cutting management costs and considering start a Limited Company.
