Three significant changes that buy to let landlords need to know for 2020
If you are a buy to let landlord or are thinking about applying for a buy to let mortgage, here are three changes that you need to be aware of:
1. Mortgage interest tax relief changes
Since April 2017 the UK government have been phasing out tax relief on mortgage interest. The proportion you’re allowed to deduct has been reduced slowly each tax year and at the start of the 2020-21 tax year on April 6th landlords will only be able to subtract a flat credit of 20% of mortgage related expenses from the rental income when filing a tax return.
2. Letting fees ban
In 2019 letting agents in England and Wales were no longer allowed to charge letting fees to prospective tenants. Additionally in England, changes were made to cap deposits at a maximum equivalent of five weeks’ rent, or six weeks’ where the annual rent is more than £50,000. These changes are intended at stopping letting agents from taking advantage by charging higher deposits from those who may have little or no alternative choice other than to rent their home.
Landlords may now have to shoulder the costs associated with processes such as referencing and property inventory checks. Letting agent fees were already banned in Scotland ahead of England and Wales, and as of yet, Northern Ireland have not introduced an outright ban.
3. Towards the end of 2019, ‘no fault’ evictions continued to be a hot topic for discussion
The government are considering repealing Section 21 of the Housing Act. The act allows landlords to terminate on-going or rolling tenancies (following the initial 6 months assured tenancy agreement) by giving just two months’ notice of termination to tenants without any need to provide a valid reason for doing so. The government considers that by repealing Section 21 will provide tenants with greater security. However, landlords are concerned that the proposed changes may result in them having to resort to the courts to remove troublesome tenants in order they may repossess homes.
The National Landlords Association responded by suggesting that the proposals were ill thought out, and Section 21 should remain intact until or unless the rules for evicting troublesome tenants are satisfactorily reviewed. With a number of changes already in place and the likelihood of more to come, make sure you take professional financial advice before entering into any proposed buy to let investment.
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