This year is looking like another busy 12 months for landlords in Berkshire, Hampshire, Gloucestershire, Oxfordshire, and Wiltshire when it comes to new legislation and changing market conditions.
“With the Renters Reform Bill potentially becoming law in 2023, and new energy efficiency rules on the horizon, it’s hugely important for landlords to be on top of compliance,” says Rob Smith, Parkers Managing Director.
“But the market is changing, too, and economic pressures mean finding the best, reliable tenants has never been more important.
“The best way to ensure you’re fully protected is through a managing letting agent.”
We’ve answered the eight key questions you should be asking this year…
1. When will the Renters Reform Bill become law?
The Renters Reform Bill has been described as the biggest private rented sector shake-up for more than 30 years – and it could become law in 2023.
A whitepaper on the Bill’s proposals was released in the summer of 2022 after years of Covid-19-related delays.
The Bill proposes several key changes you’ll need to be aware of:
The end of section 21 evictions
Section 21 ‘no fault’ evictions would be banned under the Renters Reform Bill – meaning only tenants have the right to end a tenancy, or where you have grounds for possession under section 8.
Those grounds for possession would also be strengthened under the Bill, making it easier for you to sell your rental property or move in, for example.
Meanwhile, only deposit protection would need to be proven under a revised section 8 process.
All tenancies will be periodic
Tenancies would be periodic from day one under the Bill – meaning the end of fixed term agreements.
This would give tenants the power to end a tenancy when they wish by serving notice.
The Bill also proposes that all tenant notice periods be no longer than two months, alongside revised notice periods under section 8 grounds for possession.
No bans on certain tenants will be allowed
If the Renters Reform Bill becomes law, it’s proposed to no longer allow blanket bans on certain tenants – for example, those with children or people on benefits.
A new landlord ombudsman and property portal
A Private Renters’ Ombudsman would be introduced as part of the Renters Reform Bill and all landlords would need to be part of a redress scheme.
As well as the new ombudsman, a new rental property portal would be introduced to provide tenants with more information on privately rented properties.
All private landlords would need to provide this information on a mandatory basis.
2. Are buy-to-let mortgage rates higher?
Expect buy-to-let mortgage rates to be higher in 2023 than they have been for several years.
Rising Bank of England rates since December 2021 and the mortgage market panic sparked by the government’s mini-Budget during the autumn of 2022 have seen average buy-to-let mortgage rates rise to as much as 6.5%.
Mortgage rates began to fall at the end of 2022 and continued to do so at the start of 2023.
However, if you need to refinance your buy-to-let, it’s highly likely you’ll be paying a higher rate than in previous years.
3. Will rents go up in 2023?
A discrepancy between supply and demand has seen rents across the UK rising for more than a year now.
In the South West, rents rose 4.4% between November 2021 and November 2022, while prices in the South East grew by 3.6%.
According to Rightmove’s Rental Price Tracker, the UK also saw a 20% rise in demand alongside a 9% decline in available properties.
This trend looks set to continue in 2023, with projected falling house prices providing investors with the potential for improved yields.
4. Do I need a landlord licence?
The majority of local authority additional and selective licensing schemes apply only to Houses in Multiple Occupation (HMOs).
However, in 2022 more local councils in England added licensing schemes for standard buy-to-let properties and more could follow in 2023.
Oxford, for example, introduced selective licensing for all privately rented homes in the city from September 2022.
5. What is the capital gains allowance for 2023?
Capital gains tax can apply when you sell a rental property for a profit.
Currently, however, you can claim £12,300 tax free from any annual ‘gain’ you make from selling assets like property.
From April 6, 2023, though, the annual capital gains tax allowance is reducing to £6,000 and from April 2024, it’s reducing again to £3,000.
This means if you’re planning to sell a rental property after April, you could end up paying more in capital gains tax.
6. When do new rules on energy efficiency start?
New rules on the Minimum Energy Efficiency Standard (MEES) come into force for new tenancies in 2025.
Currently, the MEES for privately rented properties is an Energy Performance Certificate (EPC) rating of ‘E’ – meaning any property with a lower rating can’t legally be let.
From 2025, however, the MEES is increasing to a ‘C’ rating, with the new rules applying to all tenancies from 2028.
This means if your rental property has a rating of ‘D’ or ‘E’, you should start thinking now about how you improve it ahead of 2025.
7. When does Making Tax Digital start?
Making Tax Digital rules were due to come into force for landlords in April 2023 – but this has now been postponed until 2026.
Making Tax Digital means landlords with a rental income of more than £50,000 will need to file quarterly tax returns via approved online accountancy software, rather than a traditional annual return.
8. Should I use a letting agent to manage my property?
With the rising cost of living and ongoing economic uncertainty, it’s important to protect yourself and your investment property.
As tenant budgets are tighter than ever, thorough referencing and affordability checks through a letting agent can help you to find the best tenants and avoid the potential for rent arrears issues.
Taking out rent guarantee insurance as part of your landlord package can also help to protect your income should you tenants fall into arrears.
To ensure you comply with ever-changing legislation, speak to us for expert advice.
