The fast-approaching festive season is the signal to begin winding down for the New Year; welcoming in vast changes to the political landscape but also the beginning of a new decade. Every single resident of the United Kingdom is set to be effected in one way or another next year by the actions of the next few weeks. Landlords on the other hand are set to be impacted by a series of changes that have been promised over varying time frames. So what exactly are these changes landlords need to be made aware of for in 2020?
Christmas is well and truly positioned at the forefront of everyone’s minds at this time of year; but the more astute property investors and buy-to-let landlords will inevitably be preparing for what’s to come over the next 12 months.
Those who look ahead and commit time to researching the legal changes set to take place in 2020, are guaranteed to make critical headway in safeguarding themselves from falling short in the ever changing landscape of property investment legislation.
As one of Manchester’s leading letting agents when it comes to ensuring all our landlords are compliant, many of our landlords will have very little to undertake to meet the forthcoming changes. But what exactly are these changes and how will they impact you as a landlord?
MEES (Minimum Energy Efficiency Standards)
At this point, the majority of landlords will now be familiar with the minimum energy efficiency standards (MEES) that came into effect in April 2018; which stated that new tenancy agreements and renewals (other than some HMOs such as bedsits) must have an energy performance certificate (EPC) rating of E or above.
By April 1, 2020, however (or April 1, 2023 for commercial property) the regulations will be extended to also cover existing tenancies. This means that, under the new legislation, properties with an energy performance certificate (EPC) rating of F or G will be classed as unrentable from that date on.
Landlords shouldn’t strive to meet these standards by the bare minimum however. Property investment is an ever-challenging and ever-shifting landscape, and there is every possibility these standards could rise again in the foreseeable future. This would likely see the ‘D’ rating becoming the minimum EPC standard. Therefore, we would advise any landlords looking to upgrade their portfolios to ensure their properties are as efficient and high a rating as possible to prevent further work and additional costs down the line.
New tax relief rules
Private and individual landlords used to be able to claim tax relief on mortgage interest payments and fees, as well as fees and interest incurred on loans to buy furnishings. In 2015 however, the government made property rentals a much less viable option following the announcement that this was to be phased out.
In 2017-18 the process began, with claimable tax relief reduced to 75%, and so the reduction continued through 2019-20. In 2020-21, landlords won’t be able to claim any tax relief on mortgage interest payments at all.
Instead, from April 2020, landlords will receive a 20% tax credit on their interest payments; not great news for those in the higher tax bracket – which could now include landlords who will have to declare the rental income that they previously used for interest payments.
Many landlords are now setting up limited companies when buying new rental properties in order to avoid the higher individual rates, but there’s no guarantee that the rules won’t change to affected limited companies in the future.
Changes to Private Residence Relief
From April 2020, landlords will lose nine months’ worth of Capital Gains tax relief should they come to sell following changes to Private Residence Relief.
While at the moment landlords can claim Private Residence Relief for all the time they lived in their property before letting it to tenants, plus an extra 18 months after moving out, this final exemption period will be reduced next April to the time they lived in their property plus just nine months post-moving out.
In addition, landlords who rent out a property that was once their main home will see the £40,000 worth of lettings relief they currently enjoy scrapped as, from April, only landlords who share an occupancy with their tenants will be able to claim. The deadline for payment of the Capital Gains Tax bill will also change from April 2020, from January 31st in the year after the tax year they made the sale, as it is now, to within 30 days of the completion of the sale.
Electrical installation checks
Last January, the Ministry of Housing, Communities and Local Government (MHCLG) announced that mandatory five-year electrical installation checks on private rented housing in England would be introduced over a transitional period of two years. The first year would see all new private tenancies subject to the checks, while the second year would encompass all existing tenancies too.
However, the implementation date has not yet been clarified so, while it is still unconfirmed as to exactly when this will begin, there is a good chance that the legislation could be introduced at some point in 2020.
Maintaining a firm grasp on current legislation is already challenging enough for landlords, never mind the task of having to analyse, understand and implement the number of changes and additions made to legislation in the sector.
It needn’t be challenging or stressful however. With Abode Property Management, our management packages are tailored to ensure your portfolio and your standards are fully compliant; whether you own one investment property or a one hundred strong portfolio. Property investment is a long-term game best played with a committed vision. Together, we can help to widen your vision and maintain your portfolio to the highest of standards. For more information on how we can help power your property profits, give us a call on 0161 883 2525.