05 Jan 2021
Its never been more important to be ahead of the game as a landlord as it is in 2021, here are 11 bitesize points to remember for 2021.
Temporary rules introduced during the COVID-19 pandemic mean landlords must now give longer notice periods when starting eviction proceedings against their tenants. England and Wales: landlords must give six months’ notice, except in the most extreme circumstances, such as when a tenant is proven to have demonstrated anti-social behaviour, committed fraud, or as is at least six months in rent arrears. This rule will apply until 31 March. Scotland: landlords must give six months’ notice in most circumstances. If the landlord or their family wants to move in, they can give three months’ notice. If the tenant has moved out or has engaged in anti-social behavior, only 28 days’ notice is required. Northern Ireland: landlords must give 12 weeks’ notice, and should not issue eviction notices unless it is ‘absolutely unavoidable’. Where possible we are trying to keep tenants in properties adhering to payment plans if they have fallen into arrears, the financial implications of serving a tenant with a 6-month notice during which time they can stay living in your property and potentially not pay a penny for it are huge. You would still be liable for compliance and repairs too of course.
If you’re struggling to pay your mortgage or your tenant is having problems paying their rent due to COVID-19, you can apply for a payment holiday on your mortgage until 31 March. The rules are as follows: If you haven’t taken a payment holiday since the start of the pandemic, you can apply for deferrals of up to six months in total. If you currently have your first deferral in place or have resumed payments after one deferral, you can apply for another one to take you up to the six-month limit. If you’ve already had six months’ worth of deferrals, you won’t be eligible for further payment holidays and will need to seek alternative support from your lender. Find out more: how to apply for a payment holiday
In late 2019, the government consulted on abolishing Section 21 – a clause which allows landlords to end ‘rolling’ tenancies with two months’ notice without giving a reason for doing so. More than a year on, Section 21 remains in place, with the Renters’ Reform Bill having been delayed for an indefinite period due to the COVID-19 pandemic. It’s possible we could see some movement on the bill this year, so landlords will need to keep a close eye on it. Other proposals featured on the bill include replacing security deposits with a ‘lifetime deposit’ that moves with the tenant and making the rogue landlord database publicly available.
Landlords can benefit from the current stamp duty cut when buying investment properties until 31 March. They still need to pay a 3% surcharge, albeit on the temporarily lower stamp duty rates. This means you’ll need to pay a flat rate of 3% on purchases from £40,000 up to £500,000.
From 1 April, overseas buyers will need to pay a 2% stamp duty surcharge when they purchase properties in England and Northern Ireland. This is on top of the regular buy-to-let surcharge. The rules apply to all non-UK residents. To be classified as a UK resident, you’ll need to have spent at least 183 days (six months) in the UK in the year before or the year after you buy the property.
Currently, landlords/agents need to check all tenants have the right to live in the UK before letting them move into a property, but this could change in 2021. Landlords have been encouraged to use the current system of accepting passports and photo identification cards until 30 June, but it’s unclear how Right to Rent will work after this date. A good letting agent will keep on top of this regulation for you.
Sunday 31 January marks the deadline for your online self-assessment tax return for the 2019-2020 tax year. Don’t miss the deadline, or you might have to pay a penalty. Some self-employed workers who owe less than £30,000 in tax can qualify to spread the cost of their bill using the government’s Time to Pay scheme.
The government is currently reviewing the capital gains tax (CGT) system, and any changes could have a significant effect on landlords selling their investment properties. In November 2020, the Office for Tax Simplification made 11 recommendations for CGT changes, including making rates ‘more closely aligned’ with income tax rates or reducing the CGT-free allowance. The government is currently reviewing these recommendations. It’s unlikely any wholesale changes will happen soon, but this is one to keep an eye on in 2021.
Mortgage interest tax relief is a sensitive subject for landlords, and we’re now coming to the sharp end of the changes that have been phased in over the last few years. When you file your 2019-20 tax return in January, you’ll be able to deduct 25% of your mortgage interest and get a 20% credit on the remaining 75%. But from your next tax return (due in January 2022 for the 2020-21 tax year), you’ll instead just get the 20% credit on all your mortgage interest.
If you use a managing agent, like Ultralets, to let out your properties in Hull, they’ll need to adhere to new client money protection rules from April. Agents must sign up to one of the government’s six approved schemes and hold money in accounts registered with the Financial Conduct Authority. Those who fail to join a scheme could face fines of up to £30,000. Ultralets have had client money protection insurance for the last 6 years without there being any legal obligation to.
New electrical safety rules mean landlords will need to ensure all electrical installations in their property are inspected and tested every five years. Tenants must be provided with a copy of the test report within 28 days (or before occupation for new tenants). The report must also be made available to your local council if requested. New tenancies have been subject to the rules since 1 July, but from 1 April 2021 existing tenancies will need to follow the regulations too. As yes, despite several lockdowns the government hasn't proposed moving the date back making it almost impossible to comply. At Ultralets we are hopeful that we can get a lot of them done in the month of March but demand for electrical installers will be incredibly high during this time.
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