With the new year comes a raft of legislative changes for landlords to prepare for and comply with.
“This year there are some key tax and compliance changes that landlords in the South West need to be aware of,” advises Rob Smith, CJ Hole’s Managing Director.
“There are also changes coming in the near future that they should be preparing for now.
“And with the economic landscape as it is, it’s also never been more important to find and retain the best tenants – which is where thorough, professional referencing and tenancy management can help.”
Here, we answer some pressing questions from landlords and explain in detail all the compliance and regulatory changes you’ll be facing this year and beyond.
1. Will UK rent go down in 2023?
UK rents have been rising in many areas for some time, due to a gap between high demand and low supply of properties.
Indeed, in the South West, average rents rose by 4.4% between November 2021 and November 2022, according to data from the Office for National Statistics.
Moreover, Rightmove’s most recent Rental Price Tracker showed a 20% rise in demand from tenants nationwide, alongside a 9% dip in the number of properties available.
2. Will UK property prices fall in 2023?
Growth in the UK property market between 2021 and 2022 exceed almost all expectations.
Prices rose by 6.3% in 2021 and 5.6% the following year as the post Covid-19 boom continued.
But with interest rates having risen from 0.1% in December 2021 to more than 3% a year later, many experts are now predicting a fall in prices through 2023:
- Rightmove predicts a 2% drop in prices
- Zoopla predicts prices will decrease by ‘up to 5%’
- Halifax suggests prices will fall by 8%
However, even those falls in value would keep most properties above their pre-pandemic values thanks to such rapid growth between 2021 and 2022.
If prices do fall in the South West, landlords may be presented with a good opportunity for improved yields, with rents rising in tandem.
3. Keep an eye on buy-to-let mortgage rates
With successive Bank of England base rate rises between December 2021 and January 2023 pushing interest rates up to 3.5%, lenders’ buy-to-let mortgage rates have crept up, too.
The government’s poorly received mini-Budget also drove lender rates up, although these started to fall back at the end of 2022.
However, buy-to-let rates are measurably higher than landlords have been used to.
So, if you need to refinance your rental property, or properties, in 2023, or you’re planning to buy more, it’s highly likely you’ll be paying a higher buy-to-let mortgage rate than in previous years.
In November 2022, the average two-year fixed buy-to-let rate was 6.5%, so a good step is always to seek independent mortgage advice.
4. The Renters Reform Bill could become law
Without doubt, the Renters Reform Bill is the biggest piece of new legislation to come into the private rented sector in decades.
After the long-awaited white paper on the Bill was released during the summer of 2022, it could become law this year.
The Bill covers a lot, but these are the main proposed changes:
All tenancies will be periodic
Fixed term tenancies will be banned if the Bill becomes law, with all tenancies becoming periodic from the day they start.
This would give tenants the right to end their tenancy at any stage by giving the minimum notice period.
Notice periods of more than two months would also be banned under the proposals, but landlords will have improved section 8 grounds for possession alongside this.
Section 21 notices will be banned
The Renters Reform Bill proposes to ban the use of section 21 notices, meaning only tenants would be able to end a tenancy without a reason.
Landlords, instead, would need to use a section 8 notice alongside a ground for possession, with these grounds set to be extended for those who wish to sell or move into their rental property.
A new property portal and landlord ombudsman
The Bill proposes to introduce a new renters’ ombudsman – with all landlords required to sign-up.
Two ombudsman schemes currently exist for letting agents, who are required to sign up by law.
But landlord membership is currently voluntary.
Under the Bill, all landlords would be required to join a single ombudsman scheme, regardless of whether they use an agent to manage their property.
As well as the ombudsman, the Bill would also bring in a property portal showing tenants more details about privately rented properties.
Blanket bans on tenants won’t be allowed
Landlords would no longer be able to issue blanket bans on certain tenants if the Renters Reform Bill becomes law.
This includes tenants with children or those on benefits.
5. You may need a licence to rent out your property
Most local authority selective or additional licensing schemes only apply to Houses in Multiple Occupation (HMOs).
However, more and more councils are adding standard buy-to-let properties to their selective licensing schemes – including the Bedminster and Brislington West wards in Bristol where all privately rented properties have required a licence since April 2022.
More authorities could introduce licensing requirements in 2023, so always check to see if your property requires a licence to be legally let.
6. Changes to EPC requirements for landlords
The Minimum Energy Efficiency Standard (MEES) was introduced in 2018, requiring all privately rented properties to have an Energy Performance Certificate (EPC) rating of at least ‘E’.
From 2025, this rating is set to change to ‘C’ for new tenancies, with the rating applying to all tenancies by 2028.
While the change is in the future, landlords whose properties have a rating below ‘C’ should start taking steps to improve this now.
7. The capital gains tax allowance in 2023
Capital gains tax may be payable when you sell a buy-to-let property for a profit, or ‘gain’.
Previously, a capital gains tax allowance of £12,300 per person was in place – meaning no tax was payable on this amount of any ‘gain’.
However, the allowance is reducing to £6,000 in April 2023 and will reduce further to £3,000 from April 2024.
This means landlords in the South West may have to pay more capital gains tax should they decide to sell a buy-to-let after April 2023.
8. Extra time for Making Tax Digital
Making Tax Digital aims to improve the self-assessment process by changing the current annual tax return rules to quarterly returns filed digitally.
For landlords earning more than £50,000 in annual rental income, Making Tax Digital was due to come into force in April 2023.
The plans have now been postponed until 2026, however, giving you more time to prepare for the changes.
9. Protect yourself against the cost of living
Rises in the cost of living have put many tenants under pressure when it comes to paying their rent.
With the prospect of arrears more likely, it’s never been more important to fully reference and assess a tenant’s financial situation through a letting agent before agreeing a tenancy.
Effective tenancy management, helping to keep good tenants in place, and rent guarantee insurance are also crucial to mitigate the prospect of rent arrears.
