How many landlords have really got to grips with the latest reforms?

Ying Tan - Dynamo
9th October 2019
Ying Tan 599

I recently noticed a headline ‘UK landlords failing to keep pace with PRS reforms’, which made me wonder just how many landlords are still either ignoring, or are unaware of, legislative and policy reforms throughout the UK rental market.

Whilst reflecting on this, it seems apt to reaffirm some of these changes.

Mortgage interest tax relief

Mortgage interest tax relief will continue to be phased out. Landlords are no longer able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs. For the 2019–20 tax year, landlords will only be able to deduct 25 per cent of their mortgage interest. And from April 2020, they won’t be able to deduct any.

Lettings fee ban

The Tenant Fees Act 2019 has finally kicked in across England to bring an end to upfront fees being charged. It has been reported that this Act is likely to cost landlords somewhere in the region of £83 million in the first year alone, meaning it’s vital that all landlords are fully aware of the changes and the impact this may have on their property related outgoings.

HMO licensing

Back in October 2018, the rule came into effect that any rental property with five or more people living in two or more households and sharing a kitchen and a toilet will require an HMO licence. The new rules also saw purpose-built flats (where there are one or two flats in the block) brought into the scope of landlord licensing.

The question is – how many landlords have really got to grips with these reforms?

If a June study by Market Financial Solutions (MFS) is anything to go, to put it mildly, there is certainly plenty of room for improvement. The research found that one in three landlords didn’t understand the changes to HMO licensing. Similar numbers admitted to being ignorant of how the lettings fee ban might impact them (27%).

It was interesting to note that there were also significant gaps in landlords’ knowledge of recent reforms when it came to taxation. For example, a quarter (25%) of the landlords surveyed said they were not up to date with the latest changes to reduced tax relief on buy-to-let mortgage repayments. Meanwhile, 28% didn’t understand the reforms to inheritance tax with regards to the amount that must be paid by the recipient when a property is left in someone’s will.

As outlined in this research, we – as an industry – need to try and find a better collective approach to help ensure landlords are fully aware of regulatory and tax reforms which are affecting them and their portfolios. Of course, a certain level of responsibility must fall on the shoulders of individual landlords, but providing a simpler path to professional advice and a stronger education process in general will ultimately help the rental marketplace become a more sustainable one for a variety of landlords and tenants. A win–win solution for all concerned.

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