Here is our summary of what you need to know and expect in 2021:
- Mortgage payment holidays ending
During the pandemic, landlords with Buy to Let mortgages have been able to apply for payment deferrals for up to six months in total. This is due to come to an end on 31st March, but it may be possible to secure an extension to 31st July 2021, but do talk to your lender.
- Stamp Duty holiday ending
In order to support the housing market through the pandemic, there has been a Stamp Duty Land Tax holiday in England and Northern Ireland for property purchases up to £500,000. In Scotland, the threshold for Land and Buildings Transaction Tax has been raised to £250,000 and the same threshold currently applies to Land Transaction Tax in Wales. These temporary measures were due to come to an end on 31st March, but, in England, Northern Ireland and Wales, have now been extended until 30th June 2021. In Scotland, from 1st April 2021, the nil rate band for Land and Building Transaction Tax will return to £145,000.
Note for landlords in Wales: remember that the LTT surcharge for second homes was raised from 3% to 4% across all price bands, as of 22nd December 2020.
- Stamp Duty surcharge introduced for overseas investors
If you are a non-UK resident landlord, from 1st April you will have to pay an additional 2% in Stamp Duty on residential property purchases in England and Northern Ireland, on top of the 3% buy-to-let surcharge.
- Mandatory 5-year electrical checks for all rented properties
By 1st April, all properties with existing tenancies must have had a full electrical inspection and test within the last five years and at five-year intervals thereafter, sooner if specified on the report. A copy of the current written report must be given to new tenants before they move in and to existing tenants within 28 days of the inspection.
- Mortgage interest no longer an ‘allowable expense’ for 2020-21 tax return
The final phase of the withdrawal of mortgage interest and finance costs as an ‘allowable expense’ came to an end on 5th April last year. That means for your tax return for the year to 5th April 2021, you will simply be able to claim relief on your property finance costs at the basic rate of Income Tax. See detailed information on the GOV.UK website.
- Right to Rent re-checking, post-Covid
While social distancing is in place, the government has amended the Right to Rent legislation to allow landlords and agents to conduct checks with tenants online via video interview and accept copies of documents. However, once pandemic restrictions permit, tenants will have to be re-checked in person with their original documentation, so be prepared to undertake this extra administration. More information is available in our ‘Changes to Right to Rent’ blog.
- Response to energy efficiency consultation
At the end of 2020, a consultation opened on how best to improve the energy efficiency of PRS properties in England and Wales. This followed on from the Government’s pledge to upgrade as many privately rented homes as possible to an EPC rating of ‘C’ by 2025 for new tenancies and 2028 for existing ones. The consultation closed on 8th January and the feedback is currently being analysed, so we expect an update soon. If you are carrying out any refurbishment it is worth working out how you can upgrade your property’s energy efficiency before the rules require it.
- Capital Gains Tax (CGT) system under review
Last year, the Chancellor commissioned a report on CGT from the Office of Tax Simplification, which was completed in November. A total of 11 changes were recommended, including:
- CGT rates should be brought more closely in line with income tax rates
- The tax-free allowance (currently £12,300) should be cut significantly, to between £2,000 and £4,000
- Assets that are exempt from Inheritance Tax shouldn’t also benefit from CGT uplift.
The tax revenue that could be raised by making these changes would certainly help build back public finances following the coronavirus pandemic, so we expect to see at least some of the recommendations being put before Parliament this year.
- Introduction of the Renters' Reform Bill in England
This Bill has been delayed indefinitely due to the impact of the pandemic, but once restrictions have lifted sufficiently and “there is a sensible and stable economic and social terrain”, the government is keen to progress it. The key changes to the lettings process proposed in the Bill are:
- Abolishing Section 21
- Introducing a ‘lifetime’ security deposit that follows the tenant from one property to another
- Making the database of ‘rogue’ landlords and agents accessible to tenants, agents, landlords, employers and professional bodies.
- Possible interest rate changes
If there are changes to interest rates this year, which could naturally affect Buy to Let mortgage rates, it may be sensible to speak to your mortgage adviser in the near future to check how a rise in rates could impact your rental profits. If you would like any advice, you can contact our partners, Embrace Financial Services, via our website.
If you have any questions about any of these planned or possible changes, simply contact your local Reeds Rains branch and speak to one of the team.