What landlords need to consider in 2022
There are plenty of potential changes in legislation on the horizon. Here is a quick break down on what you need to know
Time to review mortgage finance?
Financial changes are very much dependent on how the pandemic develops and inflation rises. With recent increases to the bank rate by the Bank of England, it is important to keep updated with how mortgage lenders are reacting.
The best advice we can give is to make sure you are talking to an independent mortgage adviser who can keep you updated on upcoming changes, so that you can act quickly if necessary. If you don’t currently have a broker, you can contact Kingsgate Partners for a free initial consultation. Call 01932 232927 or email christopher.clarke@kingsgatepartners.co.uk
Lower interest rates for the most energy-efficient properties
With energy efficiency very much in focus now, the Bank of England is starting to subject UK banks and insurers to ‘climate-related stress tests’. Proposals are that lenders may soon have to provide information on the energy efficiency of their mortgage portfolios, so some lenders have already begun to incentivise property owners to be ‘greener’.
These ‘green mortgages’ can provide more attractive deals for properties rated ‘C’ or above on the EPC. That means landlords with less energy efficient properties will be potentially paying higher premiums in comparison. Contact Christopher to find out which lenders are offering green incentives.
What will happen to taxes in 2022?
Personal tax allowance
This is the amount you can earn without paying any tax. The personal allowance for 2021-22 is £12,570 and the basic rate limit is the next £37,700 you earn – taking you to the threshold of £50,270, above which you enter the higher-rate tax band.
The big news is that the allowance and thresholds normally rise each year in line with inflation, but are expected to remain static until 2026. This is in an effort to help repay some of the costs of the pandemic.
Capital gains tax allowance
This is the money you can earn from the rise in your property’s value free of tax.
Like the personal allowance, it has been temporarily frozen and will remain at £12,300 until 2026.
Capital gains tax changes
Some good news here. There had been an expectation that capital gains tax would be increased and the CGT tax-free allowance reduced, following recommendations made by the Office of Tax Simplification.
But at the start of December 2021, the Treasury announced it was rejecting these proposals and made it clear they’re unlikely to be implemented in the near future.
While that’s great news for buy to let investors, it’s certainly worth reviewing your future plans with an independent financial adviser and tax specialist to make sure you’re going to be in the most tax-efficient position when you come to sell or dispose of your property or portfolio.
Plan to make your property portfolio more energy efficient
For England and Wales, the current proposals are for a minimum ‘C’ rating to be introduced in 2025 for new tenancies and 2028 for existing tenancies. We should know in 2022 whether this is going to be implemented.
So, if you’re renovating in 2022 or have a void period and your rental property is currently rated lower than ‘C’, it’s worth working out what improvements you need to make to improve the rating.
This should be seen as an investment, as it can help reduce utility bills – and the more money tenants save on their heating and hot water, the better they will be able to afford your rent. Also, if you can raise your EPC rating to ‘B’ or ‘A’, you may be able to access better mortgage interest rates via a ‘green mortgage’, which could save you money each month.
Changes for leasehold flat owners to look forward to
High ground rents have long been an issue for owners of leasehold properties, especially where freeholders are permitted to raise the charge – often by a significant amount – every few years.
As such, the industry has been campaigning for many years to have ground rents scrapped and the Government has finally begun to move forward with leasehold reforms.
Under the new Leasehold Reform Bill, “if any ground rent is demanded as part of a new residential long lease, it cannot be for more than one peppercorn per year”.
This means that developers of new properties can only charge a ‘peppercorn’ ground rent – effectively zero. The same will apply to anyone extending their lease under the statutory route, provided they’ve owned the property for at least two years.
The Bill passed through the Commons unopposed at the end of November 2021 and is now in the Committee Stage, where it will undergo further examination by MPs. Assuming it continues to progress without any opposition, it’s likely to become law in 2022.