Putting your money in a buy to let property can be a lucrative investment, but it’s not the same as owning your own home. As a landlord and a business owner, you need to be aware of various issues that could affect your investment:
Changes in the Mortgage Interest Tax Relief
At the start of the 2020-21 tax year, from April, you will be able to deduct a flat credit of 20% of your mortgage interest from your income rentals when you file for your tax return.
Ban on Letting Fees
Letting agents were banned from charging fees to tenants, but landlords are now burdened with paying for referencing and inventory checks of prospective tenants.
Section 21 Evictions
Tenants will be able to end a tenancy with two months’ notice. Landlords, in contrast, will only be able to end a tenancy where they can prove they have legitimate grounds.
“More than 60 councils in England operate ‘additional’ or ‘selective’ schemes. The former adds extra stipulations to the mandatory HMO rules, while the latter can apply to every landlord within the area.”
Changes to private residence relief
Effective on the 6th of April this year, lettings relief would only apply to property owners who actually share the let property with the tenant.
Rules on Energy Efficiency
From April 2020, landlords will have to meet the new regulations on Minimum Energy Efficiency Standard (MEES), requiring rented homes to have a minimum Energy Performance Certificate (EPC) rating of E. Failure to meet the regulations would require property owners to carry out energy efficiency measures on their homes, with a maximum of £3,500 per property.
A once every five years electrical safety check to be carried out by landlords on their property.
Client money protection schemes
This is an insurance for both landlords and tenants against the wrongful practices of property agents. UK letting agents must belong to a client money protection scheme.
Rogue landlord database
A database yet to be fully and truly accomplished, that lists rogue landlords across the nation. This, when done, as according to the government, will be made available to tenants, who can check whether or not their landlords or agents are in the list.
The 3% extra in stamp duty you will have to pay investing in a buy-to-let property.
Right to Rent
This requires landlords to do a background check on their tenants on whether they have the right to live in the UK. Criminal sanctions will be imposed on those who fail to comply.
Capping of ground rents and “banning long leases on new build houses and existing freehold houses other than in certain circumstances, such as shared ownership properties”.
The uncertainty of the market and outside influences that affects the value of the property and your investment directly.
Rates of buy-to-let mortgage fell throughout the last year reaching an average of 3% in December.
“With the price war between lenders likely to continue early in 2020, it’s a great opportunity to consider refinancing your portfolio and lock in a great rate. “
Economic, Brexit and government intervention
“Depending on the outcome of Brexit, the Bank of England base rate could shift in either direction, having an effect on mortgage rates.”
Other economic uncertainties could slow the property market.