13 things buy-to-let landlords need to know in 2021

Landlords are facing uncertainty around the way forward for the eviction process and also the results of COVID-19 and Brexit on property investment, meaning 2021 could be a tricky year for that buy-to-let sector.

It's a complex time for you to be a landlord, but Which? will help you get the head around the various regulations you need to be conscious of when purchasing buy-to-let and managing your portfolio.

Here are our 13 top tips on what to take into consideration this year.

1. COVID-19 eviction rules

Temporary rules introduced during the COVID-19 pandemic mean landlords must now give longer notice periods when starting eviction proceedings against their tenants.

• England and Wales: landlords must give six months’ notice, except from in the most extreme circumstances, such as when a tenant is proven to have demonstrated anti-social behaviour, committed fraud, or out of the box a minimum of six months in rent arrears. This rule will apply until 31 March.
• Scotland: landlords must give six months’ notice in many circumstances. When the landlord or their family really wants to relocate, they can give three months’ notice. If the tenant has moved out or has involved in anti-social behaviour, only 28 days’ notice is needed.
• Northern Ireland: landlords must give 12 weeks’ notice, and cannot issue eviction notices unless it's ‘absolutely unavoidable’.

2. Possible abolition of Section 21

In late 2021, the government consulted on abolishing Section 21 – a clause that allows landlords to end ‘rolling’ tenancies with two months’ notice without giving grounds for doing this.

More than a year on, Section 21 remains in position, using the Renters’ Reform Bill having been delayed for an indefinite period due to the COVID-19 pandemic.

It’s possible we could see some movement around the bill this season, so landlords will have to keep their eyes peeled.

Other proposals featured around the bill include replacing security deposits having a ‘lifetime deposit’ that moves with the tenant, and making the rogue landlord database publicly available.

3. No more mortgage payment holidays

If you’re can not pay your mortgage or your tenant has problems paying their rent because of COVID-19, you can apply for a payment holiday in your mortgage until 31 March.

The rules are listed below:

• If you haven’t taken a payment holiday since the start of the pandemic, you are able to make an application for deferrals as high as six months as a whole.
• If you have now the first deferral in position or have resumed payments after one deferral, you can make an application for a different one to take you up to the six-month limit.
• If you’ve already had six months’ price of deferrals, you won’t be eligible for further payment holidays and can need to seek alternative support from your lender.

4. The stamp duty holiday

Landlords in England, Scotland and Northern Ireland can usually benefit from the current stamp duty cut when purchasing investment properties until 31 March.

• England and Northern Ireland: landlords still need pay a 3% surcharge, albeit on the temporarily lower stamp duty rates. What this means is you’ll need to pay a set rate of 3% on purchases as much as lb500,000.
• Scotland: landlords must still pay a 4% Land and Buildings Transaction Tax (LBTT) surcharge, again around the temporarily reduced rates. What this means is you’ll have to pay 4% on purchases as much as lb250,000.
• Wales: landlords aren’t eligible for the present Land Transaction Tax (LTT) holiday and must pay the same rates as before.

5. Stamp duty surcharge for overseas investors

From 1 April, overseas buyers will need to pay a 2% stamp duty surcharge when they purchase properties in England and Northern Ireland. This is over the regular buy-to-let surcharge.

The rules apply to all non-UK residents. To be classified as a UK resident, you’ll need to have spent a minimum of 183 days (six months) in the united kingdom around before or even the year after you purchase the property.

6. Brexit uncertainty

The UK has agreed a deal using the European Union, but Brexit will probably remain a big talking point this season.

With the finer details of the deal not yet been applied in practice, there could be some additional bumps within the road.

If the current economic uncertainty continues, we may see changes to interest rates. This would then have an affect on the the cost of buy-to-let mortgages.

7. Changes to Right to Rent

Currently, landlords have to check all tenants possess the right to live in the UK before letting them move in to a property, but this could alternation in 2021.

Landlords happen to be asked to make use of the current system of accepting passports and photo identification cards until 30 June, but it’s unclear how To Rent will work after this date.

8. Taxes deadline

Sunday 31 January marks the deadline for the online self-assessment tax return for that 2021-2021 tax year. Don’t miss the deadline, or you will have to pay a penalty.

Some self-employed workers who owe less than lb30,000 in tax can qualify to spread the price of their bill while using government’s Time for you to Pay scheme.

9. Capital gains tax uncertainty

The government happens to be reviewing the capital gains tax (CGT) system, and any changes could have a significant effect on landlords selling their investment properties.

In November, the Office for Tax Simplification made 11 strategies for CGT changes, including making rates ‘more closely aligned’ with income-tax-rates or reducing the CGT-free allowance.

The government happens to be reviewing these recommendations. It’s unlikely any wholesale changes may happen soon, but this is one to keep track of in 2021.

10. Mortgage interest tax relief

Mortgage interest tax relief is really a sensitive subject for landlords, and we’re now visiting the sharp end from the changes which have been implemented during the last few years.

When you file your 2021-20 taxes in January, you’ll be able to deduct 25% of the mortgage interest and obtain a 20% credit on the remaining 75%.

But from your next taxes (due in January 2022 for that 2021-21 tax year), you’ll instead just obtain the 20% credit on all your mortgage interest.

The rules could be complicated, but you can find out more in our help guide to mortgage interest tax relief.

11. Client money protection rules

If you utilize a managing agent to let your properties in England, they’ll need to adhere to new client money protection rules from April.

Agents must sign up to among the government’s six approved schemes and hold profit accounts registered with the Financial Conduct Authority.

Those who fail to enroll in a scheme could face fines as high as lb30,000.

Agents in Scotland and Wales must follow similar rules, but there are no such regulations in position in Northern Ireland.

12. Electrical safety rules

New electrical safety rules mean landlords will have to ensure all electrical installations within their property are inspected and tested every 5 years.

Tenants must be supplied with a duplicate of the test report within 4 weeks (or before occupation for brand new tenants). The report must also should be made available to your local council if requested.

New tenancies happen to be susceptible to the rules since 1 July, but from 1 April 2021 existing tenancies will have to follow the regulations too.

13. New smoke alarm rules (Scotland)

From February, all homes in Scotland must have a smoke alarm in living spaces, hallways and landings.

In addition, you'll want a heat alarm in the kitchen area and a carbon monoxide alarm near any boilers or wood burners.

Which? advice for landlords

• Becoming a landlord
• Buy-to-let mortgages
• Using a letting agent
• Landlord insurance
• Selling a buy-to-let property