The rental sector rarely stays the same for long. In keeping with recent years, 2019 presents some changes for landlords which can affect your earning potential. The government is spearheading three major adjustments in particular.
Here, we run through the new pieces of legislation, as well as how to reduce the pressure they may have on your income moving forward.
1. The Tenant Fees Act
From June this year, tenants will no longer be liable for the fees associated with their move. This means you will be responsible for the cost of referencing and administrating the resident. Under the Tenant Fees Act, there’s a fine of £5,000 for landlords and agents who breach these rules. The only things renters have to pay themselves are permitted payments, such as the rent, deposit, and early termination charges.
In response, you can raise your basic rent. Since average lettings fees are £200-£300 outside of London, there’s cause to split the cost over the first year. For instance, a rent of £500 for a single person could rise to £520 to compensate.
2. Capped rent and two-tier deposits
As of 2019, you can’t ask for several months’ rent as a deposit anymore. Landlords can only demand five weeks’ maximum rent for properties worth up to £50,000. Over that, deposits are capped at six weeks’ rent. It’s part of the government’s tenant-first initiatives, which include limits on charging too much for damaged items in the home.
However, the reclamation process is the same as ever. You can still claim compensation for a breach of contract or broken appliances and furniture. So you won’t be left out of pocket if you have the evidence to back up what you’re charging.
Regular inspections throughout the year (not just at the end of tenancy) are key to this – not just at the end of the tenancy.
3. The last year of mortgage tax relief
Landlords have been bearing this news for a while, and it’s more real than ever as mortgage relief schemes are due to cease completely by April 2020. For the 2019/20 financial year, you can offset 25% of the mortgage cost against your taxable rental income. Next year, that won’t apply.
Mortgage relief is being replaced with relief restricted to the basic rate of Income Tax – which is currently 20%. This will be given as a tax liability reduction (as opposed to a reduction to taxable rental income). Limited company owners, however, can still claim mortgage tax back as a regular business expense. There’s more information here if you want to make calculations for rental income and total tax-free expenditure.
Whilst many things are changing, residential property remains a brilliant earning model, providing you can assess new risks and strategize effectively.
Your portfolio deserves a lettings and management agency that can ride these developments out, consult on the best areas to invest in, and make the properties themselves as attractive as possible. 4propertyUK has its finger firmly on the pulse; we’ll keep you in sight of the earnings you deserve.
From buy-to-let properties to HMOs, 4propertyUK have a range of investment opportunities to discover in Greater Manchester. Guard and grow your portfolio with our local expertise. Speak to a member of our team to discuss your investment as 2019 – and everything it brings – continues apace.