The new tax year is almost upon us, meaning a new set of rules and legislations for landlords to get to grips with, ranging from changes to eviction and deposit rules to increasing requirements for energy efficiency.
We’re here to guide you through the rules and regulations when expanding or managing your portfolio.
Here’s what you need to look out for as a landlord in 2022:
1. Reforms to Evictions and Lifetime Deposits
In 2019, the government indicated their intention to abolish Section 21 – a provision that permits landlords to recover possession with two months’ notice to end a fixed term or periodic tenancy without providing a reason.
This proposal is part of the Renters’ Reform Bill, which has been delayed repeatedly by the pandemic. The government has stated that it will issue a white paper this year, with the proposed plan to abolish Section 21 whist amending Section 8 grounds for possession.
Landlords should keep an eye out for changes in the proposal. Also, the bill proposes to change rental security deposits and offer ‘lifetime deposits’ that will move with the tenant. Consultation is currently underway to decide how this will work.
2. More Time to File Capital Gains Tax Bills
The Chancellor announced modifications to the deadlines for reporting and paying capital gains tax (CGT) on property disposals in the Autumn budget.
The change, which took effect immediately, means that you will now have 60 days to declare and pay your capital gains tax bill when selling a buy-to-let property, rather than the 30 days previously required.
The government recently held a consultation on capital gains tax rates but has since stated that no significant changes will be made to the current regulations.
3. Energy Efficiency Rules
The current rules state that private rented properties in the UK must currently have an Energy Performance Certificate (EPC) grade of ‘E’ in order to be legally let out. However, England and Wales have proposed raising the minimum rating to ‘C’ by 2025. The Lettings Industry Council has submitted a recommendation to defer this requirement.
Therefore, if your rental property is rated ‘D’ or ‘E’, now is the time to start improving its energy efficiency before the new laws take effect. Costs in doing so are currently capped at £3500 inc. VAT, however the proposal is to increase this cap to £10,000 inc. VAT.
Under certain circumstances, you can apply for an exemption, details of which can be found here.
In Scotland, legislation mandating all rental homes to have a minimum ‘E’ rating was scheduled to come into force in April 2020 but was postponed because of the pandemic. The decision was made to skip the ‘E’ requirement in April 2022 and replace it with a ‘D’ requirement.
However, the Scottish government has since opted to align their proposal with England and Wales, which means that in 2025, Scottish tenancies will require a ‘C’ rating.
4. The Growth of Green Mortgages
This year could be the year of the ‘green mortgage’, with a rising number of lenders offering special deals and cheaper rates to landlords who buy energy-efficient properties. Also, banks are beginning to provide reduced rates on additional borrowing to landlords who use the money to make sustainable improvements to their rental homes.
5. The Leasehold Reform Bill
The Leasehold Reform Bill received Royal Assent on February 8th, 2022, making it a law – albeit its provisions will not take effect until the Secretary of State appoints a date through regulations.
The Act limits ground rent to a ‘peppercorn rent’. A peppercorn rent has no financial value. The word alludes to the old practice of providing a peppercorn as a token of consideration to make a binding contract.
The purpose of the cap is to protect leaseholders from becoming trapped by fast-growing rents and to create a fairer, more transparent ownership for leaseholders.
The act also prohibits administration charges for peppercorn rents as an anti-avoidance measure.
Thinking of expanding your lettings portfolio this year? Contact our expert estate agents for more advice.