Landlords Corner – Prepare Yourself For Challenges In 2024
2024 is just around the corner, and while this is a busy time of year, there is a lot to occupy landlords. Knowing what comes next, and what challenges await the lettings sector next year is of benefit, and at Trading Places, we are here to ensure you are fully informed as to the key issues that are likely to impact your business in the year ahead.
All Landlords Should Brace Themselves For Challenges In 2024
Landlords in the UK are being cautioned about a significant increase in operational costs, projected to rise by up to 80% within the next two years. This warning comes from the Intermediary Mortgage Lenders Association (IMLA), focusing on smaller-scale landlords with mortgages.
The IMLA's recent study sheds light on the current financial landscape for landlords. It reveals that the median annual rental income for a landlord is approximately £14,000, with profits averaging just under £9,000. Moreover, the study found that 80% of landlords own one or two properties, which account for 61% of the private rented sector, while only 13% own four or more properties.
Kate Davies, executive director of IMLA, comments: “The PRS plays a vital role in the UK’s housing landscape, providing homes to 20% of households. While a great deal of attention is, quite rightly, paid to the difficulties faced by tenants, there has been surprisingly little understanding of landlord finances and the strains on these, until now. Our research shows that many landlords are small businesses with modest financial turnover and trading profits, facing rapidly rising costs. Sadly, reality dictates that many mortgaged landlords will have no choice but to increase rents in order to keep their businesses viable, while debt-free landlords may well do the same in order to make an adequate return, even if that is lower than current returns available elsewhere.”
No matter the challenges which landlords face as we move forward, we are here to assist you as best we can.
Home Energy Model Is Relevant For Landlords
As a landlord, it's essential to be aware of the UK government's initiative to replace the current Standard Assessment Procedure (SAP) with a new home energy rating system, the Home Energy Model (HEM). This change is part of a broader strategy to decarbonise the country's housing stock and achieve net zero emissions. The SAP, integral in generating Energy Performance Certificates (EPCs), is also used in building regulations, government grant schemes, and policy evaluations. The new HEM, designed by the Building Research Establishment (BRE), will be a cornerstone of the Future Homes Standard, affecting homes built from 2025 onwards.
The Home Energy Model is designed to ensure new homes are 'zero carbon ready', equipped with low carbon heating and high levels of energy efficiency. It stands out for its compatibility with green technologies such as heat pumps, smart control devices, and storage technologies. With its modular design and detailed half-hourly energy performance data throughout the year, the HEM provides a more accurate representation of smart technologies and energy storage. This new system is set to eventually power assessments for EPCs, marking a significant shift in the standards for energy efficiency.
For landlords, these upcoming changes mean adapting to new standards for energy efficiency in both existing and future properties. Keeping abreast of these developments is crucial for compliance and enhancing the energy performance of your rental properties. The proposal to make the Home Energy Model open source also indicates increased transparency and easier access for industry professionals to adapt and apply the methodology in various contexts.
Gillian Charlesworth, the chief executive of BRE, says: “The introduction of the Home Energy Model is a significant milestone on the road to achieving net zero across the UK’s housing stock. As uptake of green technologies increases, an effective assessment methodology which accounts for these changes will be imperative as the Government looks to secure buy-in from homeowners, house builders, and the retrofit industry on the net zero transition and achieve its targets in this area.”
Charles continued by saying: “BRE has worked closely with government since SAP was introduced, and we are excited about the potential for ambitious policies and programmes for low carbon homes which the latest version will support. These changes to the SAP methodology will have wide-reaching impacts not only for government, but across industry. I therefore urge all relevant stakeholders to take part in this consultation to ensure that the final design of the Home Energy Model is as well informed as possible.”
Unexpected Mail Is A Taxing Issue At Any Time of Year
In December, an unexpected item through the post is often quite welcome, especially if it is a Christmas card from an old friend or someone you lost touch with. However, not all correspondence is positive, and many landlords might receive a letter from HMRC enquiring if they have paid all tax on their rental property.
In recent years, some landlords incorporated their business for various reasons, including minimising the level of tax they have to pay.
The reminder letters sent by the tax authorities prompt taxpayers to verify the accuracy of their tax relief calculations. These communications provide detailed references to specific HM Revenue & Customs (HMRC) guidelines, focusing on technical aspects and the reliefs offered. Additionally, taxpayers are given a 30-day period to respond to these notices.
Heather Powell, a partner and Head of Property and Construction says: “Landlords who incorporated their property business but have not reported a capital gain on their 2017/18 self-assessment tax return are being sent a ‘nudge letter. Incorporating a property business is an integral element of many of the schemes marketed to landlords significantly impacted by the restriction of interest when calculating the income tax payable on rents received from properties held personally.”
We are always here to help
Many landlords struggle with paperwork, and staying on top of legislation, but we are here to assist you, ensuring your tenants receive everything they need in your rental property. if you are looking for guidance on the Leytonstone rental market, or you just want a helping hand in complying with rental market regulations, we are always here to assist you.
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