2020 Brings changes for Landlords

Landlords have had to contend with a layering of changes in fiscal and regulatory policy targeting the buy-to-let market since 2015.

They used to deduct all finance costs from their rental income and profits were taxed at their marginal rate. However, starting from April 2017 and phased in over a four-year period, tax relief for finance costs are being restricted to a basic rate tax credit. The phased reduction began with claimable tax relief reduced to 75% and continued through 2019 to 2020.

In the 2020 to 2021 tax year, landlords won’t be able to claim any tax relief on mortgage interest payments. Instead, from April 2020, they will receive a 20% tax credit on interest payments. In response, landlords are adopting a range of different strategies to mitigate the impact of these changes, ranging from rent increases to portfolio resizing.

Since April 2018, landlords have been required to achieve a minimum rating of E on the Energy Performance Certificate (EPC) for their rental property for new tenancies or tenancy renewals. From April 2020, this will be extended to cover existing tenancies, meaning all rented properties will need to have an EPC rating of E, even where there has been no change in tenancy. If your property is let on an assured tenancy, a regulated tenancy or a domestic agricultural tenancy, and is legally required to have an EPC, it is covered by these new regulations. If the property you let has been marketed for sale or let, or modified, in the past 10 years then it will probably be legally required to have an EPC.

Properties with an EPC rating of F or G after 1 April 2020 will be classed as ‘unrentable’, so now is the time to make energy efficiency improvements. However, under the regulation’s cost cap, landlords will never be required to spend more than £3,500, including VAT. Where a property cannot be improved sufficiently to achieve an EPC rating of E for £3,500 or less, landlords must take all steps up to £3,500 and register an ‘all improvements made’ exemption.

It’s important landlords don’t rest on their laurels, as the Government has set out its long-term vision to improve energy performance standards of privately rented homes in England and Wales, with the aim for ‘as many of them as possible to be upgraded to EPC Band C by 2030, where practical, cost-effective and affordable’.

It has been suggested that this ambition may lead to new regulations to raise the current standard further to a D rating by 2025 and a C rating by 2030 in England and Wales. EPC D is already required in Scotland by 2025 and the Scottish Government is already consulting on an additional target of C by 2030.