9 points that landlords need to know in 2021
With the current situation and the many developments expected to occur in 2021, the property market will certainly see some changes.
1. New Safety Requirements
2021 brings in new safety requirements that landlords need to follow to rent their properties, whilst keeping up with compliance and regulations. Landlords will need to have an Electrical Installation Condition Report for every property they own for new and existing tenancies by April 1st 2021.
This report outlines the safety of the electrical wiring, sockets and the installation itself. Going forward, landlords will need to carry out this report once every five years, with the tenants being issued a copy of the report within 28 days of the inspection.
2. Stamp duty holiday ends
The Stamp Duty holiday announcement has meant that the property market has picked up, with the last few months experiencing record levels in sales and approved mortgages. Investors who are looking to expand their property portfolios will also have until Match 31st 2021 to benefit from the stamp duty holiday.
Although this means that no stamp duty has to be paid for properties up £500,000, the 3% stamp duty surcharge for additional homes still applies.
It's still to be seen if the government will extend the stamp duty holiday after March 31st 2021, however, if no extension is made, the standard stamp duty rates will apply for properties above £125,000. The additional 3% stamp duty surcharge for additional homes will still apply once the standard stamp duty resumes.
3. Tax changes
2020/21 saw some significant tax changes for landlords. Mortgage interest rate tax relief was completely phased out and replaced with a 20% tax credit for mortgage interest, which in turn is less generous than the previous system if you are a high rate taxpayer.
Although the change came into force on April 6th 2020, its impact will only be felt from April 2021, as most landlords pay income tax through self-assessment, which is only completed once the relevant tax year has ended.
With the Brexit transition currently taking place, there is presently an uncertainty on how this will impact landlords. Currently, landlords have to ensure and verify every tenant's status and if they can legally rent a property.
However, from January 1st 2021, the UK has introduced a new immigration points-based system. It's not clear what checks landlords will need to make under the new immigration rules, as the government has delayed this announcement due to the current pandemic. For the time being, landlords are required to follow the current measures which are in place.
5. Evictions will resume
Due to the current pandemic, the government has extended the ban on bailiff evictions for all, but extreme cases until February 21st 2021. There may be an additional extension on this date if the government feels that it needs to support tenants for a more extended period due to the pandemic.
The current exception to this ban is for evictions due to anti-social behaviour, illegal occupation, fraud, rent arrears for more than six months, and domestic abuse in the social sector.
6. Right to have a pet
Currently, landlords can choose if they allow pets or not. However, 2021 could see landlords losing their right to have this option, as the Dogs and Domestic Animals Bill continues to work its way through the parliament.
Although this bill is still to be approved, this is undoubtedly one to keep an eye on.
7. Protecting clients' money
An extension until April 1st 2021 has been made for letting agents to comply with the rules governing the protection of clients' money. Under this legislation, any clients' money whether it belongs to tenants or landlords, must be held in a client money protection scheme by April 1st 2021, with estate agents requiring to show a certificate of which schemes they are part of in their offices and website.
8. Renters' Reform Bill
The Renters' Reform Bill will resume its progress through parliament this year after it was postponed last year due to the government responding to the pandemic.
Measures in the bill, which only applies to England, include ending landlords' ability to evict tenants without a good reason (through the scrapping of section 21 evictions), giving landlords more rights to remove tenants if they have a valid reason. An introduction of a lifetime deposit scheme enables tenants to transfer their deposit from one property to another.
9. Digital tax accounts
Investment landlords with VAT-registered businesses that generate a turnover of more than £85,000 are already required to have a digital tax account, as part of HM Revenue & Customs' (HMRC) Making Tax Digital initiative.
From April 2022, all businesses, regardless of their turnover, will have to follow the Making Tax Digital rules. The rules will require landlords to send HMRC quarterly updates on their income and expenses through their digital accounts, rather than completing an annual tax return, meaning they have 2021 to gear up for the change.
Landlords who have not registered their properties as a business but earn an income of more than £10,000 a year from rent will have to comply with the rules from April 6th 2023.
If you are a Landlord and need some advice or want to have a chat about us managing your property portfolio, speak with one of our property experts today by calling us on 0116 266 9977.