What You Need To Know As A Buy-To-Let Landlord In 2020

New tax years often bring changes that will impact those within property investment and how they’re taxed. Buy-to-let landlords this year are currently facing fluctuating property prices and a reduction in their tax relief, as well as changes in energy efficiency regulations, allowable deposit requests, and changes to Capital Gains Tax and Private Residence Relief.

We know that it’s difficult to pay close attention to taxation changes – let alone reflect legislation updates in you letting agreements. So, to help, we’ve outlined below exactly what you need to know as a landlord renting property in 2020.

New energy efficiency rules

Since April 2018, landlords have been required by law to achieve a minimum rating of E on the Energy Performance Certificate (EPC). This currently applies for all new tenancies and renewals. However, from April 2020, this will be extended to properties where there is no change in tenancy.

If your property doesn’t meet the new Minimum Energy Efficiency Standard Regulations, you’ll need to carry out certain measures for it to be deemed ‘rentable’. These measures have a cap of £3,500 on each property. If improvements exceed this amount, you must register an ‘all improvements made’ exemption.

Should you fail to make these changes, and your buy-to-let property remains on the market with an EPC rating of F or G, then your property will be deemed ‘unrentable’ after 1st April 2020.

Tenant Fees Act

In 2019, letting agents in both England and Wales were banned from charging fees to tenants. This proved controversial as many agents then advised their landlords to charge even higher rent prices to mitigate against the loss. The reason for this is that landlords are now burdened with referencing costs and inventory checks (not agents).

In England, these changes go one step further. Landlords are no longer permitted to request deposits exceeding the total of five weeks’ rent. In cases where the annual rent of the buy-to-let property is more than £50,000, however, landlords can request a total of up to six weeks’ rent instead.

Changes to mortgage interest tax relief

Since April 2017, tax relief for mortgage costs have gradually been phased out through a 25% year-on-year reduction for four years. This means that, by 2021, landlords will return to only a basic-rate tax credit.

For those that rely on government allowances for mortgage interest payments, you are still entitled to a 25% reduction.

On top of this, to ease the impact of a return to high interest rates, the government is offering a 20% tax credit for all buy-to-let landlords, designed to cover their property finance costs.

Changes to Capital Gains Tax and Private Residence Relief

Capital Gains Tax is taxation on profit made from selling (or ‘disposing of’) an asset that has experienced capital growth. For most landlords, this particularly concerns the selling of property.

An exemption from Capital Gains Tax, Private Residence Relief is an allowance based on the time that landlords spent living in their property prior to letting it to tenants. This also includes an extra 18 months following the landlords moving out. In addition to this landlords may have also benefited from lettings relief currently, this relief is worth up to £40,000 (£80,000 for couples).

From April 2020, however, this will be reduced to the time that landlords spent living in the property, plus only 9 months after leaving. What’s more, the credits will largely only apply to landlords that are (or were) in a shared occupancy with their tenant.

Rumours concerning Stamp Duty Land Tax

The long-debated tax on property purchasing has had even more speculation this year, with rumours circulating that a new Stamp Duty surcharge could be brought in for foreign buyers investing in UK property.

Stamp Duty usually applies on all homes (or piece of land) valued at more than £125,000. This extends to second homes; however there is an additional 3% charged for the purchase of a buy to let., However, as part of the Governments response to the coronavirus crisis form the 8 July to 31 March 2021 the first £500,000 will be exempt from the normal stamp duty rates. Landlords would therefore only be liable for the higher 3% charge on property purchases.

Perhaps more frustratingly for property investors, though, is the 3% buy-to-let Stamp Duty surcharge that the government introduced in 2016 – penalising them even further. There is currently no sign that this is to be removed or reduced.

How GoSimpleTax can help

At GoSimpleTax, we specialise in supporting all those with earnings outside of PAYE in being tax compliant – including landlords with rental property. We understand that, at times like these, it’s tough enough to secure buildings insurance, let alone qualify for the available grants and allowances.

It’s for this reason that our software is designed to highlight ways you can reduce your tax liability where possible, and keep you on the right side of the taxman by compiling and submitting an accurate Self Assessment tax return.

So, if you’d be interested in lowering your accountancy costs and navigating changing legislation yourself this year, trial our software today.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.