What landlords need to know in 2022?

With the effects of the pandemic continuing and with so much turmoil already felt by landlords over the past 18 months, what will 2022 have in store for the buy-to-let landlord market?

We’ve pulled together our thoughts on all the things landlords need to know in 2022, including predictions, trends and legislation changes over the coming 12 months.

What did 2021 buy-to-let market deliver?

The property sector has weathered many storms during 2021 and so has the landlord market.

Many landlords had a good year in 2021 with record low mortgage rates, a stamp duty holiday and average number of UK house sales increasing by over 30%, and average rents across the UK up by 5% year on year (excluding London).

However, there were many landlords faced major issues of over due rent payments and in some areas, there was a temporary renter exodus.

What does 2022 hold for landlords?

Without a doubt the picture doesn’t look like all good news for landlords in 2022. Below are just some of the predictions of what 2022 may mean for landlords.

House price growth set to slow in 2022

2021 saw house prices rise by over 30% in some are ads, meaning many landlords selling properties made hefty capital gains. More landlords may look to realise these capital gains in 2022 by selling or mortgaging to release equity. Whether house prices continue to soar in 2022 will depend on supply and demand. However, many experts are predicting a more subdued property marketing price increase over the coming 12 months.

Rents likely to rise

Depending on the Covid situation, it looks likely that rents will continue to rise as they did in 2021. Often with economic uncertainty people look to rent rather than make a large purchase.

Rental growth is at a 10-year high in many regions in the UK, except London and Scotland, where rental demand continues to outstrip supply, according to Zoopla.

If landlords decide to leave the rental market during 2022 due to more legislation or to realise their capital gains, then there will be fiercer competition for rental properties which will force rents to continue to rise.

Tax return changes

With the deadline for filing your self-assessment tax return for 2020/21 being 31st January, landlords need to ensure that their tax return is completed. This is the first time the new mortgage interest tax relief credit applies, meaning landlords can offset 20% of their mortgage interest payments on their tax return.

Renters’ reform bill

Section 21 – a clause allowing landlords to end ‘rolling’ tenancies with two months’ notice without giving a reason was discussed back in 2019 with a view to potentially abolishing this clause. However the proposal has been delayed by the pandemic but may well be back on the agenda in 2022 with the Renters’ Reform Bill.

The Renters’ Reform Bill was dubbed ‘the biggest change to the private rented sector for a generation’ will also include plans on creating a rogue landlord database that will be viewable by the public.

Also included in the bill will be plans for replacing rental security deposits with a ‘lifetime deposit’ that will move with the tenant. This looks at how to address issues tenants have at the end of tenancies where they need extra funds to cover a second deposit on their new home when their previous deposit hasn’t been returned to them. But what if the deposit has been retained to cover damage or rent arrears and the tenant fails to make up the difference? Questions still to be answered.

The government are due to publish a white paper early this year, so landlords will need to keep their eyes open for any news on this.

Capital gains tax reporting

In the budget 2021 there was an announcement to change filing deadlines for reporting and paying capital gains tax on disposal of properties. You now have 60 days to report and pay your CGT bill when selling any buy-to-let properties.

Energy efficiency rules changes

It seems the government is set to continue on it’s course to improve energy efficiency in the rental sector. By 2026, landlords must ensure that newly let properties achieve band C on energy performance certificates (EPCs) – the deadline is 2028 for existing lets. However, there was discussion on placing a £10,000 cap on the costs of upgrades for landlords, but this hasn’t yet been confirmed. So it’s worth hanging fire on upgrades for now if you think they may cost more than £10,000 until this is clarified.

Mortgages

Whilst buy-to-let mortgage rates fell slightly in 2021, with inflation increases potentially on the horizon this could mean higher mortgage costs in 2022.

This year may also see a rise in lenders offering green mortgages to landlords who buy energy efficiency properties. These could offer reduced rates or additional borrowing to fund sustainable home improvements.

New model tenancy agreement

The new model tenancy agreement means landlords can’t put blanket bans on pets in rental homes in England. As a landlord you must now object in writing and should have ‘good reason’ for rejecting the request for example smaller flats where it’s impractical.

Summary

Being a landlord over the past few years has changed constantly. However, with rents continuing to rise, many smaller landlords cashing out of the market and the potential still for strong profits, being a landlord is still a good business proposition. The rental market sets to remain strong in 2022, but landlords need to continually update their knowledge on legislation changes and government initiatives.

Here at dns accountants, we support thousands of landlords with help and advice from our experts. If you want more help and advice on what 2022 holds for landlords or are looking for an accountant and advisor who understands the landlord market then call us today on 03330 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.