Everything you need to know as a landlord in 2023 - Gorilla Accountants (2024)

With several major legislative changes and compliance reforms set for landlords in the next 12 months, adding more to the list of things to do and things to know, when you’re already short of time, can feel like a huge chore. As a landlord, you will already be spending your days managing contracts, taking calls, undertaking maintenance and vetting prospective tenants, as well as managing your finances and taxes.

Depending on how many properties you have on your roster, you may have an agency taking care of a lot of this for you. But if you’re going it alone and maintaining a portfolio of properties, as well as working full time yourself, it can be difficult to keep on top of any changes you need to know.

Being a landlord is just like managing a business, and can be just as rewarding. The extra income can provide long-term security for you and your family, and property makes the perfect retirement pot.

There are so many advantages to being a landlord – the extra income undoubtedly being the main draw. Having that extra money come in each month can pay off the mortgage on your buy-to-let mortgage, leaving you with financial freedom down the line. The return on your property investment will be even greater if you own it outright already.

Although all rental income is taxable, there are still a number of tax-deductible expenses, including repainting, replacing damaged furniture, repairs, insurance and professional services, plus general wear and tear. Whilst mortgage interest isn’t deductible from your rental income, as an individual landlord you may be entitled to a basic rate tax reduction against your profits. To ensure the ROI of your property continues, it’s important to work with an accountant to make sure you’re not paying any more than you need to.

But what do you need to know as a landlord in 2023? Let’s take a look at the rules coming in and how to mitigate them during this difficult economic time:

1) The Renters Reform Bill

The biggest potential legislative change this year is the Renters Reform Bill. Under the Renters Reform Bill, section 21 ‘no fault’ evictions would be banned. This would mean that tenancies would only be able to come to an end when the TENANT decides, unless you have legitimate grounds for possession under a ‘revised section 8 process’.

The Bill proposes to give landlords stronger grounds for possession to balance this. Only deposit protection would be needed to use the revised section 8 grounds. This means that on top of selling or moving into a property more easily, landlords would also find it easier to deal with antisocial tenants or those that are in arrears.

2) No more fixed term tenancies

The Renters Reform Bill would also abolish fixed term tenancies, making all tenancies periodic from day one. This would allow tenants the freedom to give notice at any stage of their tenancy, and not be trapped in a contract. Tenant notice periods of any more than two months would also be banned if the Renters Reform Bill is passed.

If you were to sell your property, or move into it yourself, you can give the tenants in the property two months’ notice of your intentions, under a revised section 8 procedure.

3) The end of blanket bans on tenants

The Reform Bill will also see a change for those landlords that place blanket bans on certain people when it comes to renting out a property. If it becomes a law, landlords would be banned from placing blanket bans on tenants, such as those that claim benefits, or renters with children or pets.

4) A new landlord ombudsman

Another one from the Renters Reform Bill – it will be mandatory to join the Private Renters Ombudsman as a landlord. Currently, it is only required of letting agents to belong to one of two ombudsman schemes, but it is voluntary for landlords themselves.

On top of this, it is proposed that a new property portal is created for all tenants to gain more details about a particular property before they commit to renting it.

5) Broadening Landlord Licensing

In the past, licensing schemes have only been applied to ‘House in Multiple Occupations’ – or ‘HMOs’. Now, more and more local authorities are including standard, single-tenancy buy-to-lets too.

By broadening these landlord licensing rules, you should check to see if you require a licence now or may do in the future.

6) Capital gains tax

Selling a rental property for more than you paid for it is always the aim down the line. As the years go by, property prices continue to rise, so it’s usually an inevitable investment.

However, with that comes capital gains tax. The current tax-free allowance for capital gains tax is £12,300 per person. However from April 2023, this allowance will be reduced to £6,000, before reducing further to £3,000 in April 2024.

7) EPC changes and Energy Efficiency

As part of the government’s plan of net zero by 2050, the Minimum Energy Efficiency Standard for rented homes is changing across the country. Currently, the MEES has an Energy Performance Certificate (EPC) rating of ‘E’.

If a property is rated ‘F’ or ‘G’, legally it cannot be rented out to a tenant. And from 2025, a property has to have an EPC rating of ‘C’ or above to comply.

New tenancies will be affected straight away, followed by all tenancies following the rules by 2028. Although this is two years away, a lot could need to be done to a property to improve it enough to rise to a ‘C’ rating from a ‘D’ or an ‘E’.

Here are some of the ways to improve your minimum energy performance:

• Loft insulation is easy to install, inexpensive and can make a huge difference to your bills.
• Wall insulation – Insulating cavity or solid walls can improve your EPC rating.
• Replacing a boiler can cut your energy bills.
• Solar panels produce cheaper, greener energy.
• Upgrading windows and doors to double glazing will improve your home’s energy performance and reduce noise too.
• Adding an efficient secondary heating source, such as a wood-burning stove instead of an open fireplace, can give you greater fuel efficiency and reduce costs in the long run.

9) Making Tax Digital

At Gorilla, we are passionate about making sure our clients work in a way that is MTD compliant. Although MTD for Landlords doesn’t technically come into force until 2026 now, after being pushed back from this year, it is worth making sure you’re ready for any changes.

Landlords who own property personally with and have annual rental income of more than £50,000 will need to comply with Making Tax Digital for Income Tax and Self-assessment from April 2026.This process will involve making quarterly submissions to HMRC and a final end of period assessment at the end of the tax year.

From April 2027 the threshold will be reduced to £30,000 which means those with annual rental income of £30,000 will also have to begin complying with the rules.

Using an MTD compliant software such as FreeAgent can ensure that all of your financial paperwork is in one place, on a digital, cloud-based software that can be accessed by you and your accountant anywhere, at any time. It will also place you in prime position to begin complying with the MTD ITSA rules from April 2026.

Being a Landlord in 2023

As we all know, ongoing pressures during the Cost of Living Crisis means everything around us is getting more expensive. It’s more important than ever to make sure any tenants you do have are fully referenced and you do everything in your power to reduce the risk of rent arrears. Making sure tenants have a guarantor and covering yourself with rent guarantee insurance can really help.

Good news for landlords is that rental prices across the UK continue to rise. The demand for tenants is offset by the lack of properties available, meaning rents are set to rise by another 5% in 2023, following an already substantial rise of 9.7% in 2022.

If property prices fall this year, rising rents could provide more opportunities for landlords.

However, rising interest rates to combat inflation has made it potentially more difficult for landlords to actually purchase new properties or refinance current buy-to-lets. In January 2023, the base rate had risen to 3.5%, with a further rise in February taking it to 4%. This in turn has made mortgage rates rise. This is worth noting if you’re looking to extend your portfolio in 2023.

Organisation is key

Making sure that you have the best advisors and know all the information you need as a landlord renting out buy-to-let properties is key. Keeping on top of the latest legislation can be hard work, but incredibly important, especially when it comes to your finances.

If you’re looking for an expert landlord accountant, Gorilla Accounting offers landlord accountancy services. Speak to one of our expert team today by calling 0330 107 9672 or join us here.