Property owners and landlords have faced an increasing number of challenges in 2023 due to economic conditions, compliance reforms and changes to legislation including a reduction in the dividend allowance, a decrease in the Capital Gains tax-free allowance and a change to Corporation Tax and the rate payable.
Being a landlord can be a busy occupation if you’re hands on. You must deal with day-to-day management of your properties such as handling tenant issues and associated actions, maintenance, ensuring your portfolio meets all relevant standards and regulations and much more. Perhaps you’ve had problem tenants and are chasing rent arrears while covering a buy-to-let mortgage from your own pocket. The challenges can be very wide ranging!
You may have a bigger portfolio and use a letting agency to manage a lot of this work for you, but that will come at a cost. But if you’re going it alone it’s not easy to run your business, especially if being a landlord isn’t your full-time occupation. This all adds up to making it challenging to keep on top of legislative and compliance changes as well as managing your business and your accounting and tax obligations.
The steady rise of interest rates has turned the screw on property owners, as well as owner-occupiers, making mortgages more expensive, and rents have been driven up as a result. This has made it much more difficult for property owners to expand their portfolios or to remortgage existing properties.
This all means that there’s never been a better time to appoint a property accountant to ensure that your business is running as financially efficiently as possible as well as freeing up more of your time to focus on core activities.
In this blog post we break down some of the key challenges landlords will face from the forthcoming Renters Reform Bill and how appointing a property accountant can benefit your property business.
The Renters Reform Bill
In May 2023 the Renters Reform Bill was brought before Parliament and it will have a significant effect on landlords, renters, and the buy-to-let market when it becomes law.
Through this bill the Government aims to introduce ‘once-in-a-generation’ reform to the private rental sector with the onus on improving things for renters to create “safer, fairer and higher quality homes” and “a better deal for renters”.
The bill is still being debated in Parliament and there has been a significant recent change relating to Section 21.
Section 21 No Fault Eviction Abolition Delayed
In a recent U-turn that is great new news for landlords and property owners, the Government has indefinitely scrapped plans to abolish section 21 ‘no fault’ evictions. The key driver of this decision is that significant reform of the court system is required as the Government fears it will be unable to cope with the volume of contested possession claims.
Through Section 21 landlords can evict tenants once they’ve given 2 months’ notice upon the expiration of their fixed-term contract. Under Section 21 landlords don’t have to provide a reason for the eviction which is why it’s referred to as a ‘no fault’ eviction.
This reversal reduces security for renters but does give landlords more control in terms of who they let to, and their portfolio overall. It also means that landlords will likely gravitate towards longer term lets which provide a more reliable and consistent income stream.
Introduction of a Private Landlord Ombudsman
When the Renters Reform Act becomes law, landlords must join a Government-approved Ombudsman scheme which will give more redress to renters in case of any issues with their accommodation.
If a renter has a complaint against their landlord, they can have the Ombudsman independently investigate it. The Ombudsman will then have powers to rectify things for the renter which can include ordering the landlord to complete remedial action and pay compensation up to £25,000. The Ombudsman can also order landlords to refund rent. This change puts the onus on landlords to ensure that their portfolio meets all required standards.
The Decent Homes Standard
It’s likely that when the Renters Reform Bill becomes law, it will apply the Decent Homes Standard to the private rented sector. Currently only applicable to the social housing sector, the Decent Homes Standard provides a minimum standard that housing providers must adhere to with the aim of improving the quality of social housing, so all renters have healthy, safe and secure accommodation.
Property owners and landlords in the private housing sector already have responsibilities such as ensuring electrical safety checks are completed every 5 years and that smoke detectors and carbon monoxide detectors are fitted in all properties. Properties must also have an Energy Performance Certificate rating of E or better.
If, as is likely, the Decent Homes Standard is enforced on the private rental sector, it will take things a step further and mandate landlords to make further improvements to ensure that properties in their portfolio meet or exceed the minimum housing standards. For landlords with lower quality properties, there might be a significant cost implication to bring their properties up to spec.
Increased Notice Period to Raise Rents
Another proposal in the Renters Reform Bill that tips the balance of power in favour of the renter is an increase in the notice period landlords must give to increase rents. This change will mandate landlords to give 2 months’ notice period for any increase in rent instead of the current 1 month notice period.
The increase must be in line with market rates and there’s no cap on the amount rents can be put up by, but tenants are able to dispute the increase through a tribunal if they feel it is disproportionately high. Landlords will also be restricted to one rent increase per annum.
There’s Never Been a Better Time to Appoint a Property Accountant
We understand that landlords are currently facing various economic and legislative challenges, and this is why there’s never been a better time to engage a property accountant to ensure your business is running as financially efficiently as possible.
Gorilla Accounting are expert property accountants. We work with landlords in both the residential and commercial sectors and will help you successfully manage and optimise your buy-to-let finances no matter what size portfolio you have.
We have a tiered pricing structure based on the size of your portfolio which means that for a great value fixed monthly fee with no hidden surprises, all your business and personal accounting needs will be expertly handled. This frees up your time so you can focus on managing your portfolio and gives you peace of mind that all your accounting and tax obligations are in order.
With Gorilla, you work with your own dedicated property accountant who will be on hand to provide unlimited expert support and specialist advice around capital gains tax and stamp duty land tax. Our Client Service Guarantee means you’ll get a same working day response to all queries submitted to us before 3pm or we’ll issue you with a £50 payment. Full access to market-leading FreeAgent Accounting Software is also included at no extra cost.
Your accountant will also help improve your tax-efficiency by ensuring that you have the best remuneration strategy and take full advantage of all available allowable expenses, reliefs and deductions which will help contribute to increased profitability and long-term financial growth and success.
Call 0330 024 0406 to speak to an accountant to find out more about our property accounting service today or request a call back here.
