The dawn of a new year often means 12 months of legislation and rule changes for landlords to absorb – and that’s certainly the case now we’re moving through 2023.
“The new year is looking like another year of change for landlords in Yorkshire and the North East,” says Rob Smith, Managing Director of Whitegates.
“The best way to navigate the change and ensure you remain compliant at all times is to use a managing letting agent.
“An agent can also help you to fully reference potential tenants – something else that will be hugely important as the cost-of-living continues to bite.”
In this guide, we’ve outlined all the important changes you need to know about this year and what you need to do…
1. Prepare for rising interest rates
Interest rates began to rise from historic lows in December 2021.
And as we entered 2023, the Bank of England’s base rate had increased to 3.5% in January.
Mortgage rates, meanwhile, rose quickly following the government’s mini-Budget in 2022.
So, you’ll need to prepare if you’re due to refinance your buy-to-let this year or invest in further properties.
Average buy-to-let fixed rates over two years were 6.5% in November, although those rates have been falling, so seeking independent mortgage advice is the best step.
2. Do you need a landlord’s licence?
While most additional and selective licensing schemes apply only to Houses in Multiple Occupation, more and more local councils are bringing in licensing rules for standard buy-to-lets.
Areas like Nottingham and Leicester brought in new licensing rules in 2022 and other areas across the East Midlands, North East and Yorkshire could follow suit this year.
3. Start thinking about EPC changes for landlords
The government’s drive towards improved energy efficiency in UK homes means a tightening of Minimum Energy Efficiency (MEES) rules is on the horizon.
And now is the time to start preparing for this.
In 2025, the MEES standard will change from an Energy Performance Certificate ‘E’ rating to a ‘C’ rating for new tenancies.
The rules will then roll out to all tenancies from 2028.
Although this may seem like a long time away, if your rental property has an EPC rating below ‘C’, you may need to make improvements before 2025.
4. Get ready for the Renters Reform Bill
The long-awaited whitepaper on the government’s Rental Reform Bill was released in June 2022 – and the Bill could become law in 2023.
It’s been heralded as the biggest private rented sector shake-up in decades and there are a number of important elements you should be aware of:
No more section 21 evictions
The Renters Reform Bill proposes to abolish section 21 evictions – meaning tenancies will only end if the tenant decides to, or if you have grounds for possession under section 8.
The Bill would also strengthen landlord grounds for possession under section 8 – making it easier to regain possession if you need to, with only deposit protection needing to be proven.
The end of fixed terms
Fixed term tenancies will no longer exist if the Bill becomes law and all tenancies would become periodic from the start.
Notice periods of longer than two months would also be banned but strengthened section 8 grounds will allow you to regain possession of your property if you wish to sell it or move in yourself.
Blanket bans won’t be allowed
The Bill becoming law would mean blanket bans on tenants who claim benefits or who have children would no longer be allowed.
A new landlord ombudsman and property portal
To help the court system, the Bill proposes to introduce a new Private Renters’ Ombudsman – with a mandatory sign-up required by all landlords.
While all letting agents are required by law to be a member of one of two ombudsman schemes, landlord membership is voluntary.
The Bill would change that, with all landlords required to join a single ombudsman – aimed at streamlining the process and reducing confusion caused by multiple schemes.
You would also need to provide details of your rental properties for a proposed new portal under the Bill, aimed at giving tenants more information before they sign a tenancy.
5. Factor in growing tenancy demand and rising rents
Rents across the UK are rising – including in Yorkshire and the Humber and the North East.
Average rents in the UK rose by 4% in the year to November 2022, according to the Office for National Statistics.
In Yorkshire and the Humber, this figure was 4.1%, while the North East saw rental price growth of 3.5%.
Rightmove’s Rental Price Tracker also reported a 20% rise in demand alongside a 9% decline in available properties.
With property prices predicted to fall in 2023, coupled with rising rents, landlords could find some excellent yield opportunities.
6. Protect yourself against cost-of-living pressure
Tenant budgets are feeling the strain of rises to the cost of living.
So, it’s never been more important to thoroughly reference and assess potential tenants through a letting agent – mitigating the risk of rent arrears.
Rent guarantee insurance is also a great way to add a layer of protection to your rental income should your tenants get into difficulty.
7. Making Tax Digital for landlords
The introduction of Making Tax Digital for landlords was due to arrive in April 2023.
However, this has now been postponed until 2026.
Under Making Tax Digital, landlords with a rental income of more than £50,000 per year will need to file digital tax returns every quarter, instead of annually.
8. Be aware of changes to capital gains tax
If you decide to sell a buy-to-let property, you may have to pay capital gains tax on any profit you make.
Currently, you can claim a tax-free allowance of £12,300.
But that is reducing to £6,000 from April 6, 2023 – and could increase the amount of tax you have to pay.
Furthermore, from April 2024, the capital gains tax-free allowance is reducing again – to £3,000.
