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Landlord Legal & Compliance Landlord Tax, Finances & Saving Costs Managing Your Rental Property

Making Tax Digital has Landlords worried – Be compliant in 3 easy steps

Making Tax Digital
Making Tax Digital

Making Tax Digital has Landlords worried – Be compliant in 3 easy steps

The rules for Making Tax Digital (MTD) for Income Tax will be coming into force from 6 April 2024 and it will affect landlords. Read on for how this government initiative will impact you and what you will need to do to prepare for the changes coming into effect in April 2024.

MDT

What is Making Tax Digital?

It is a government initiative to make tax administration more efficient and easier for taxpayers through the implementation of a fully digital tax system. The government says it is introducing Making Tax Digital to make it easier for people and businesses to manage their tax affairs and to help prevent avoidable mistakes that are believed to cost many billions of pounds a year in lost tax revenue.

Which landlords will be affected by Making Tax Digital for Income Tax?

This initiative will affect landlords with property income above £10,000. You must still file a Self-Assessment tax return (SA100) for the tax year before you comply with MTD for Income Tax Self-Assessment requirements. But once you do, you won’t have to complete a Self-Assessment tax return (SA100) each year.

Landlords with property income of between £1,000 and £10,000 a year will need to continue filing annual tax returns through the Self-Assessment process.

If you already use software to maintain your financial records, HMRC recommends asking your provider whether their software is or will be Making Tax Digital for income tax compatible.

MDT

How do you become Making Tax Digital compliant?

1. Maintain digital records – you must keep digital records of all your transactions. These records must be held digitally (e.g. invoice and expenses data) and kept for the required period after the tax year ends (currently five years). You will need to use MTD-compatible software to maintain and report digital records of your rental income and expenses.

2. Register for MTD – register for the digital tax service through your existing Government Gateway account. The GOV.UK website helpfully lists software that is compatible with Making Tax Digital for Income Tax. Making Tax Digital for Income Tax-compatible software can:

  • maintain business records as required by the regulations
  • prepare and send quarterly updates and end-of-period statements using the information maintained in your records
  • finalize your business income and submit your declaration after the end of the tax year
  • communicate with HMRC digitally through HMRC’s (application programming interface – API) platform.

3. File four tax returns a year instead of one – under the new rules, affected landlords will need to send a summary of their business income and expenses to HMRC every three months using compatible software.

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Rising interest rates – what buy-to-let landlords need to know

interest rates
interest rates

Rising interest rates – what buy-to-let landlords need to know

The rise in interest rates has a lot of landlords asking the question, increase rent or sell.

Why are interest rates increasing?

The government’s disastrous mini-budget led to instability in the financial markets with interest rates and fluctuations in the value of the pound. In response, the Bank of England said it “will not hesitate” to raise the Bank Rate to steady the pound and bring inflation under control.

interest rates

At the Bank of England’s Monetary Policy Committee in September 2022, the MPC voted to increase Bank Rate to 2.25%. The National Residential Landlords Association (NRLA) said the recent rise in interest rates and further increases expected down the line “are likely to leave landlords with little choice but to pass on at least some of the costs”.

What does the rise in interest rates mean for landlords?

For landlords with variable interest rate mortgages, the truth is that you will be facing face higher monthly repayments and landlords with fixed interest rate mortgages will probably be able to breathe a bit easier, but not for long because they may also find themselves faced with higher interest rates when their current deal runs out.

What should landlords do about the higher interest rates?

Realistically, landlords have 3 options, all of which have their advantages and disadvantages.

1. Don’t do anything – if you already have a high return from your property and are not affected too much by the interest rate rise then you can choose to do nothing however landlords need to be aware of the changing circumstances of the market and their tenants’ situations.

interest rates

2. Increase rents to meet the cost of the effect of the interest rate increase – although this might allow landlords to meet the increase in their mortgage costs, you have to be aware of the current financial strain that your tenants may be under as a result of soaring inflation, an increase in the cost of living and energy costs.

3. Sell the property – selling may provide short-term relief from the effect of the interest rate increase however a lack of investment because people may not be able to get the mortgage to buy the property could lead to downward pressure on house prices. This means landlords who’re looking to sell in the future could lose out on capital gains

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Landlord Legal & Compliance Maintenance, Repairs & Decorating Managing Your Rental Property

Key Repair Responsibilities – how to keep your tenants safe

repairs

Key Repair Responsibilities - how to keep your tenants safe

Landlords are responsible for most repairs in a privately rented property. However, landlords can only make repairs when they are told about them either via text message, email or using a third-party service like our Log A Job platform service.

What do landlords have to repair?

In the first instance, all repair obligations should be detailed in the tenancy agreement however, there are things that landlords are obligated to fix whether or not it is stated in the tenancy agreement. These responsibilities can’t be removed by anything your tenancy agreement may say and landlords aren’t allowed to charge tenants for any repair work that is their responsibility to fix.

repairs

So it is a good idea for landlords to have a sinking fund for these types of obligations so should they need to fix something urgently, there are funds available to use to help ensure landlords are meeting their legal obligations to keep the privately rented property in a state of good repair.  So things like

  • the structure and exterior of your home, i.e., the roof, the walls, the drains, windows etc
  • toilets, sinks, baths and drains
  • electrical wiring
  • radiators
  • water and gas pipes
  • heating and hot water

The timescales to fix a repair will depend on what needs to be done and how serious it is however in all cases the landlord must carry out repairs within a reasonable period of time.

Don’t tenants have responsibilities too?

Yes, tenants are responsible for some repairs as well as paying for it themselves. They are responsible for

  • fixing furniture or appliances they own
  • any damage caused by themselves, their guests and/or family guests
  • any minor repairs set out in the agreed tenancy agreement

Additionally, if tenants don’t take responsible care to keep things like toilets or drains clear, landlords can ask the tenant to pay the repair costs.

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Anti-Money Laundering Regulations for Landlords

Anti-Money Laundering Regulations for Landlords

All letting agents and potentially, therefore, Landlords if they let directly, will need to comply with Anti-Money Laundering Regulations.

What is Money Laundering?

Money Laundering is a way by which criminals disguise the source and ownership of their money in an attempt to make the money lose its criminal identity and appear as though it has originated from a legitimate source.

anti money laundering

Customer Due Diligence

For landlords using an agent to let their property then it is the agent’s responsibility to ensure they ‘know their customer’, and therefore should be able to demonstrate Customer Due Diligence

The leading membership body for property agents, Propertymark believes “it is best practice for all letting agents, regardless of whether they fall under the definition of businesses with HMRC for AML supervision to carry out CDD on all their customers”. So even if you do not meet the criteria, it is best practice to:

  • take appropriate steps to identify and assess risks of money laundering and terrorist financing
  • establish an up-to-date written risk assessment and a written policy on how to manage the risk
  • appoint a nominated officer – Money Laundering Reporting Officer (MLRO) – who will be responsible for the letting agency complying with the Money Laundering Regulations
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Smoke and Carbon Monoxide Alarm Regulations

smoke alarm

Smoke and Carbon Monoxide Alarm Regulations

Although the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 came into force on 1 October 2015, the Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022 will come into force on 1 October 2022. 

It is important to note that there will be no transitional period after 1 October 2022 and the local authorities can impose a fine of up to £5,000 if a landlord fails to comply with a remedial notice.

What do the new Regulations mean?

In brief, all landlords must now ensure

  • that a carbon monoxide alarm is provided on each storey of their homes where there is a room used as living accommodation
  • that a carbon monoxide alarm in any room used as living accommodation which contains a fixed combustion appliance, this does not include gas cookers. It should be stated that this has been a legal requirement in the private rented sector since 2015
  • that smoke alarms and carbon monoxide alarms are repaired or replaced once they are informed and the alarms are found to be faulty. 
smoke alram

Are the tenants responsible for anything?

Landlords will be responsible for repairing or replacing any faulty alarms however if the tenant finds that their smoke alarms and carbon monoxide alarms are not in working order during the tenancy because of the batteries, then they are advised to arrange for the replacement of the batteries.

If the alarms do not work after replacing the batteries, or if tenants are unable to replace the batteries themselves, then they should report this to the landlord.

Landlords should also consider providing their tenants with instructions on how and how often to test the alarms to make sure they are in working order.

Which tenancies are exempt from these regulations?

  • shared accommodation with a landlord or landlord’s family
  • long leases
  • student halls of residence
  • hotels and refuges
  • care homes
  • hospitals and hospices
  • low-cost ownership homes
  • other accommodation relating to health care provision
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Redress scheme update for private landlords

Redress scheme update for private landlords

A redress scheme is an independent body set up to resolve complaints made by consumers against a member of the scheme. From 1 October 2008, every person in England who engages in estate agency work (property managers and letting agents) must be a member of an independent approved redress scheme. Private landlords can also join a redress scheme should they wish to do so, however, this is not a legal requirement.

There are only three redress schemes that an agent can join. They are:

How does it work?

The scheme allows consumers to escalate a complaint they have against a member of the scheme. The main aim is to resolve or settle unresolved complaints from consumers who have suffered a loss as a result of the actions of the member of the scheme. Redress schemes can order their members to pay compensation, with the threat of expulsion if the compensation is not paid.

What is the update for Private Landlords?

In January 2019 the Communities Secretary announced that all private landlords would be legally required to join a ‘housing redress scheme’ but since then there has been no sign of detailed proposals, however, in January 2020, the Government confirmed that leaseholders would be benefitting from a redress scheme, and as recently as March 2021 the current Housing Secretary, Robert Jenrick, stated in a speech to the National Housing Federation Summit that “tenants should be able to seek redress in a reasonable time without an uphill struggle and know that they will be heard”.

To this end, they have partnered up with the Property Redress Scheme and more recently The Dispute Service to set up a pilot scheme for their members. The scheme which will be free to NRLA members will provide a route for tenants to have their unresolved complaints dealt with by an independent third party in a confidential and non-confrontational process.

How can Property and Homes Management help Private Landlords with the scheme?

Our platform is all about helping landlord manage their properties more efficiently when it comes to repair and maintenance issues. By using our self-management service, landlords are able to act quickly when dealing with repair requests from their tenants, which in turn will help to reduce the need for the tenants to make complaints.   

By also keeping a track of the repair logs, a landlord can use our service to show a clear history of their dealings with tenant repair requests.

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Spring Statement 2022: The forecast for landlords

Spring Statement 2022: The forecast for landlords

Rishi Sunak, Chancellor of the Exchequer, released his Spring statement on March 23rd 2022. Here’s a summary of the key points and how they will impact landlords

From 2025, the minimum energy efficiency standard for rental properties is set to be increased to C for new tenancies and it will then be extended to existing tenancies from 2028.

 

The Chancellor announced a cut in VAT for homeowners buying energy-saving materials, i.e. insulation materials, solar panels, heat pumps etc. For the next five years, homeowners will pay zero per cent VAT on materials for improving the energy efficiency of their properties. Not only will this help people to save on energy bills, but make it cheaper for people to install these energy-efficient materials;

The Chancellor’s Statement also featured other announcements designed to address the UK’s ongoing cost of living crisis, including a move to cut the basic rate of income tax from 20% to 19% by the end of the parliament in 2024.

A major announcement that may likely affect most landlords depending on how you own your properties was made in the Chancellor’s tax plan which sees the National Insurance tax threshold increase of £3,000, to £12,570, which works out to be roughly £330 per year per worker, resulting in a £6 billion tax cut across the UK. 

What about rental reforms?

The government announced details of widespread rental reforms as part of its levelling up agenda in February 2022. The reforms are set to include:

  • the end of Section 21 evictions
  • more fines and bans for rogue landlords
  • a consultation on a national landlord register
  • a minimum standard for all private rental properties

However, there was no update in the Spring Statement about when these proposals could be introduced.

So whilst landlords may not have been heavily impacted by the Government’s budget adjustments there has been no further clarity on how the private rented sector can address the important issue of energy efficiency.

You can read the full 2022 Spring Statement here, and the Spring Statement Tax Plan, here.

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Energy performance certificate updates for landlords

energy performance certificate

Energy performance certificate updates for landlords

Landlords renting their property in the UK are expected to have an energy performance certificate (EPC), which confirms how energy-efficient the property is.

What is an Energy Performance Certificate?

An EPC gives detailed information about your property’s energy efficiency and carbon dioxide emissions. They were first introduced in England and Wales in 2007 and they are valid for 10 years, so depending on when you bought the property, you may still have a valid EPC.

An assessor will carry out a full inspection and the property will be given an energy-efficiency grade between A and G, with A being the best (he most energy-efficient) and G being the worst (least efficient). Click here to view an EPC sample.

Your EPC will also come with a recommendation report containing advice and improvements that will make your property more energy-efficient.

As a landlord, you have a legal responsibility to carry out the changes suggested in your EPC report and you may spend up to a maximum of £3,500 on these energy efficiency improvements, including any funding or grants given by the government, local authorities or energy companies.

If your suggested improvements exceed £3,500, you can apply for a high-cost exemption via the PRS Exemptions Register.

What are the current EPC requirements?

The Minimum Energy Efficiency Standard regulations set a minimum energy efficiency standard of Energy Performance Rating E for domestic private rented properties in England and Wales however the Government has committed to upgrading as many private rented sector homes as possible to an EPC Band C by 2030, where practical, cost-effective and affordable.  

When do I need to renew my EPC?

If an EPC expires after the 10-year period, landlords are not automatically required to get a new one unless you intend to let to a new tenant, or you wish to sell the property. Remember, you are legally required to provide your tenant with a copy of the EPC.

What are the new EPC regulations for landlords in 2021?

So in 2021, changes to the Minimum Energy Efficiency Standards were announced that will affect landlords and rentals from 2025.

The Government’s preferred policy scenario which is currently under consultation for improving the energy performance of privately rented homes comprises of four elements:

  • Raising the energy performance standard to an EPC energy efficiency rating of Band C;
  • A phased trajectory for achieving the improvements for new tenancies from 2025 and all tenancies from 2028;
  • Increasing the maximum investment amount, resulting in an average per-property spend of £4,700 under a £10,000 cap
  • Introducing a ‘fabric first’ approach to energy performance improvements.

The findings of the Government’s consultation are expected to be published in 2022.

energy performance certificate

How can landlords prepare for the new 2025 EPC regulations?

The government have recommended a “fabric first” approach, which includes covering a wall, loft and floor insulation. The installation of a smart meter is also recommended.  It is important to note that energy performance investment is currently capped at £3,500 for landlords, but as the higher EPC rating will require a greater investment, the cap will be raised to £10,000.

The government estimate that on average the improvement needed to reach an EPC rating of “C” will cost landlords around £4,700.

As you can imagine, achieving an EPC rating of ‘C’ will be more difficult than an ‘E’, especially if you have a property, so landlords are encouraged to apply for the Green Homes Grant where possible.

What happens if I don’t have an EPC?

You may be fined up to £5,000 by your local authorities if you are found to have no EPC, however, when the regulations are updated in 2025, the penalty for not having a valid EPC of ‘C’ or above will be raised to £30,000.

Also, remember that EPC requirements aren’t the only announcement for landlords in 2021 as mandatory electrical safety inspections came into force in April. Click here to read about these changes.

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Tenancy Deposit Protection – Which is right for you?

Tenancy Deposit Protection – Which is right for you?

Since the Housing Act came into effect in 2004, as a landlord, it has been a legal requirement to put your tenants’ deposit into a government-approved tenancy deposit scheme if you rent your home on an assured shorthold tenancy that started after 6 April 2007. In England and Wales your deposit can be registered with:

The schemes are designed to keep the tenant’s money safe and to help make sure they get back what they are owed at the end of your tenancy. There are two types of schemes offered by the government-approved providers, insured and custodial.

Custodial or Insured, which option is best for you?

The custodial deposit protection schemes are ideal for landlords who don’t want to hold the deposit themselves and is usually free for landlords to join and use.

Custodial scheme

A custodial scheme protects a tenant’s deposit because:

  • the scheme administrator holds the deposit until it is required to be paid back
  • the deposit is safe if the landlord or their letting agent goes out of business

Insured deposit protection scheme

The insured deposit protection scheme is completely free to join. As a landlord, you pay a small fee to protect each deposit, which means you can keep your deposit in your bank account for the duration of the tenancy, keeping the accrued interest and at the end of the tenancy, you as the landlord would administer the repayment with the tenant. If the tenant disputes any deductions, the protection schemes you joined would provide a free dispute resolution service.

 

 Custodial

 Insured

Deposit held by

Scheme provider

Landlord

Cost

Free

Small fee

Landlord/Agent must provide prescribed information

Yes

Yes

Can return the agreed deposit without involved scheme

No

Yes

Must involve scheme with disputes

Yes

Yes

Free alternative dispute resolution

Yes

Yes

Dispute decision is final

Yes

Yes

How much should the deposit be?

The tenancy deposit will usually be the same amount as 4 or 5 weeks’ rent as it is now illegal for landlords to force tenants to pay a deposit of more than 5 weeks’ rent (or 6 weeks’ rent if the annual rent is more than £50,000).

It’s all about timing

Landlords or letting agents must put the deposit in the scheme within 30 days of getting it and then provide the tenant with the ‘prescribed information’ which includes details about the property and your deposit. Once you have registered with a scheme will give you the option to print out the ‘prescribed information’. Landlords cannot evict tenants with a section 21 notice if they haven’t given their tenants this information.

At the end of the tenancy

Landlords must return a tenant’s deposit within 10 days of both agreeing how much will be paid back after you have dealt with any issues that may require a deduction from the rent (i.e. unpaid rent, damage to the property etc.).

If the tenants dispute the amount to be paid back then the deposit will be protected in the Tenancy Deposit Protection scheme until the issue is sorted out.

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Self Management as a Landlord – What it’s all about

self management

Self Management as a Landlord – What it’s all about

So what exactly is self-management? I mean I know you want to buy a property and rent it out yourself, but are you really ready to self manage your own property without the help of a property manager.

What is Self-management?

Self-management, in the context of property, simply means you as the landlord, managing your own property, from finding tenants to organising your inventory, to sorting out the deposit, ensuring you have a tenancy agreement drafted that deals with repairs that come up during the course of the tenancy. In a nutshell, everything alls to you as the landlord to research, organise and implement and in most cases, this is a lot of work to do.

self management

However a lot of people, (like ourselves) have noticed that as much as some landlords sometimes can and may want to do it all by themselves, it does help to have a little helping hand from those who have been in the property business for longer. 

Pros of self-management

Of all the pros of self-managing your own property, here are the two main ones that landlords tend to find attractive about managing your property yourself, such as:

  • More control – you will essentially be in charge of making all the decisions in relation to the property. You get to choose your own tenants, build a good relationship with them and have a better oversight on the condition of your property.
  • Save money – by managing the property yourself, you don’t have to pay a percentage of your profits to a management agent to manage your property for you.
Cons of self-management

While there are some advantages to self-management, there also are a number of disadvantages, two of which are:

  • Legal and financial responsibilities – there are legal and financial mistakes that you as a landlord could face when trying to self manage your property by yourself. For example, making sure you have registered the deposit, carried out an inventory check, keep the property in good repair, etc.
  • The demand on your time – let’s put it simply, if a tenant calls you at 3 am about the loss of heat or a burst pipe, you have to find a solution fast. As the first port of call for all tenant enquiries, you (the landlord) will have to ensure that you have given your tenant’s contact details to speak to you when they have questions or issues with the property.
self management
The alternative

Before you jump ahead and think the alternative is having your property managed by a managing agent think again. As well as being a property management business, we are one of the very few who offer landlords who want to self manage their own property, an alternative that allows them to do that but with the support of our experience within the property market.

You can CLICK HERE to find out more about this service, but in brief, the alternative we offer our clients is access to our unique platform.

Our property management platform is a quick, simple, jargon free and easy to use platform that takes away all the hassle, stress and core administrative tasks of managing a property, all without the need to hire a dedicated estate agent.

You don’t need to download software or learn how to use complex tools it is all done online through our website. 

So managing your property doesn’t have to be stressful or time-consuming.

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