Major Changes For Property Investors In 2020
Coming into force 1 April 2020
New EPC regulations
From 1 April 2020 all rented properties, including existing rentals and renewals, will need to meet aminimum Energy Performance Certificate (EPC) rating of E. Landlords of rented properties that do not meetthe regulations will be required to carry out energy efficiency measures on their investment homes up to acap of £3,500 for each property and any breaches will be liable to pay a fine of £4,000. More information onthis can be found on the GOV.UK guidance page: Private Rented Sector minimum energy efficiency standard exemptions.
Coming into force 6 April 2020
Tax relief on mortgage interest
Property investors will already know that since April 2017 tax relief on mortgage interest for second and subsequent properties has been phased out, with the allowable deductions being reduced each tax year. From 6 April 2020 property investors will not be able to deduct any mortgage expenses at all from the rental income but instead will receive a flat tax credit of 20% of their mortgage interest payments.
Capital Gains Tax (CGT)
CGT is not payable when anyone sells their primary residence as this sale qualifies for 100% private residence relief. CGT is also not payable if a company sells a second or subsequent property as corporation tax is applied instead. Owners of second and subsequent properties will have to pay CGT on any gains made on the sale of property which was not their main residence, however, as the relief will not apply. Currently, any CGT must be paid in the year following the event which created the liability. For example, if an investor sold their property in the 2018/19 tax year then the tax liability was not payable until the end of January 2020. As from 6 April 2020 however, although the rates have not changed, the tax liability must be paid in full within 30 days of completion of the sale, failing which HMRC will levy penalties.
The rules around letting relief are also changing. Previously property investors could claim up to £40,000 in capital gains tax relief if a second or subsequent property is, or has been, their main home, even if they have not lived in it for a long time. They could also benefit from an exemption which meant that any gains made in the final 18 months of ownership could be discounted. From 6 April 2020 this loophole will be closed and sellers will only be able to claim this relief if they actually live in the property with their tenant. The exemption is reduced to the gains made in the final 9 months of ownership too.
Coming into force 1 June 2020
Tenants deposits
The transition period for capped deposits under the Tenants Fees Act 2019 comes to an end and as from 1 June 2020 deposits for all tenancies in England will be capped regardless of when the tenancy commenced.
The cap for tenants’ deposits are:
(a) 5 weeks rent where the annual rent does not exceed £50,000;
(b) 6 weeks rent where the annual rent exceeds £50,000.
If the deposit which was paid exceeds these capped limits then landlords will be required to refund the excess to the tenant.
Landlords will be aware that any deposit paid by the tenant is the tenant’s money, not the landlord’s, and within 30 days of payment it must be lodged in one of three government backed tenancy deposit schemes. The tenant must be informed as to where and how their deposit is held and provided with some specific information. There is a penalty for not adhering to this.
Coming into force 1 July 2020
Compulsory electrical safety standards
As from 1 July 2020 landlords in England will need to ensure when they create a new tenancy that they carry out an electrical installation inspection, by a qualified person, with a copy of the results being given to new and interested tenants within 28 days of request or prior to occupation. The inspections will need to be repeated every five years.
Coming into force 1 April 2021
Compulsory electrical safety standards
As from 1 April 2021 landlords of properties which are let out on existing tenancy agreements in England will need to ensure that there is an electrical installation inspection by a qualified person in place for the property. They will then need to repeat this at least every five years with the results being given to tenants within 28 days.
Coming into force 1 April 2021
2% stamp duty land tax surcharge for foreign buyers
Non-UK tax residents who purchase properties in England will have to pay an additional 2% stamp duty land tax on top of any other surcharges. It may apply to companies as well as individuals and the definition of ‘non-resident’ is still under discussion at the time of writing.
