UK Property Management Regulations: What Landlords Need to Know?
UK PROPERTY MANAGEMENT REGULATIONS: WHAT LANDLORDS NEED TO KNOW?
Find out what regulations you need to consider for 2023 in the UK if you have a buy-to-let property.
In the last few years, landlords have heard repeatedly about the upcoming regulatory changes with no real clarity on what those changes imply. There are more changes expected within the next 5 years, but some are knocking at landlords’ doors right now. Find out what are the rules and regulations you need to know about and how that could affect the way you manage your rental property.
EPC REGULATIONS
The Government’s Plan for Net Zero carbon emissions has already started to have an impact on the housing market with the new EPC regulations hitting in April 2023. All rental properties are now required to have a minimum energy rating of E, a regulation that will tighten again after 2025, where all rental properties will need to have a C rating and above.
Simply Business estimated last year that about 55% of landlords still had to make £5,000+ improvements on their properties before deadline and research shows that in 2023 about 40% of landlords own properties rated D and below.
So, what does that mean?
Avoid being in a comparable situation for the next tightening and change the way you manage your property to prepare for what is to come:
PLAN & BUDGET
Run an audit, evaluate what steps you need to take to improve your rating and create a financial plan to back it up. Financial support exists but it is limited so a fund to finance all your improvements should be on your top list of business priorities.
CONSIDER STARTING EARLY
The best way to tackle improvements is through planned work. In between tenant contracts you can do more serious improvements such as working on insulation, re-roofing, changing windows to double or triple-glazed, installing underfloor heating or maybe even unfortunately the boiler. Then perhaps while your tenants are on holidays, work on smaller improvements such as investing in renewable energy (e.g., solar panels), installing smart meters or upgrade the lighting to LED light bulbs. Also, as maintenance repairs are happening, think longer-term and use those opportunities to upgrade where you can.
GET SPECIALIST SUPPORT
A Property Management company can do your improvement timeline, help with creating a financial plan, consult with applying for financial support, guide you with their expertise to de-risk your choices, and most importantly save you money. A high-standard Property Management company has professional resources at hand they work with regularly, who deliver quality work, on a partner-friendly rate.
CAPITAL GAINS TAX
What is Capital Gains Tax? When you sell an asset, you own that has increased in value since you purchased it, you will have to pay tax on that difference. It is that ‘gain’ that gets taxed not the entire sum you get for the asset.
In the Autumn Statement, it was announced that the tax-free threshold for capital gains tax will reduce from 1st of April 2023. The tax-free threshold is moving from £12,300 to £6,000 and the again to £3,000 in April 2024. There is hope that with the uptick on the economy this announcement would change but there is no update thus far.
So, what does this mean for your portfolio?
If you are a landlord considering selling a second property, understand that your profits will be exposed to tax. Also know that capital gains tax rates differ when you are selling a property.
Higher and additional rate taxpayers pay capital gains tax rates of:
- 28 per cent on residential property
- 20 per cent on other chargeable assets
But broadly, the basic rates for capital gains tax are:
- 18 per cent on residential property
- 10 per cent on other chargeable assets
RENTAL REFORM BILL
In 2022, The Government had published its long-awaited rental reform white paper, which included measures to encourage pet ownership and scrap Section 21 evictions. The Government has described the proposed reforms as the biggest change to law for tenants and landlords in a generation. Here is a summary of the main reforms announced last year that can affect the way you run property management:
PET OWNERSHIP
- Landlords will need to have a ‘good reason’ to not allow tenants to have a pet in their home, and if they refuse pets, tenants can challenge their decision. However, landlords will be able to require their renters to get insurance to cover property damage caused by pets.
DECENT HOME STANDARD
- The Decent Homes Standard is currently used in social housing but the bill planes to extend it to private rental homes as well.
SECTION 21 EVICTIONS
- Planned to be scrapped completely and tenancies to only end if a tenant ends it or if landlords have a valid reason, as defined in law.
FAMILIES & BENEFITS
- Landlords can no longer have a blanket ban on renting to families with children or to those on benefits.
So, what does this mean for your property management?
The Department of Levelling Up, Housing and Communities plans to get the bill passed into legislation before the end of this Parliamentary term, which will be May 2023, but no update thus far.
As a landlord watch the Bill closely to see how these seismic changes will happen and how they will affect the way you manage your property. If it passes into law, you will no longer be allowed to refuse pets without valid reasoning, evict tenants or discriminate based on tenants receiving financial support. The consequences could lead to major penalties.
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If you need expertise and support in the London Market, Wentworth Properties are a Property Management company with high standards of delivery. Don’t hold back from getting in touch, we are here to help.
