Whether you are an accidental landlord, a professional buy-to-let landlord or want to rent your home out on a temporary basis, you need to be aware of your responsibilities both legally and from a financial point of view.
A good place to begin is by visiting the government website, which covers all aspects of renting out property.
There are several areas that need to be addressed and these begin with the drawing up of a legal tenancy agreement. Once this is in place, safety issues must be dealt with. These include the gas and electricity appliances in the building and fire safety requirements for furniture and fittings.
Landlords must also provide an energy performance certificate (EPC) for the property they are letting.
The previously contentious issue of deposits from the tenant has also been dealt with by government legislation, meaning they are protected by being paid into an approved scheme.
Another potential source of conflict is an agreed inventory between the landlord and the tenant. New technology is available, making it easier to avoid disputes. The use of property inventory software from providers such as inventorybase.com is increasingly popular in the letting arena.
For landlords who are not renting out multiple properties, there are legal issues that must be addressed; for example, they need to inform any mortgage lender that someone other than the registered owner will be living in the property. Depending on the agreement with the lender, the borrower may need to change their mortgage.
There are also tax implications that need to be dealt with, covering both income tax and potential capital gains tax liabilities that arise from the landlord’s role. In the case of the former, any revenue generated from renting the property will be added to their current annual income and should be entered on a self-assessment tax return. Expenses incurred during the letting period can be offset to reduce the bill. With a buy-to-let mortgage, this can include interest payments, agents’ fees and maintenance costs.
Selling a property that is not the landlord’s main property is likely to incur capital gains tax, although this can be reduced by the costs of repairs. Landlords should ensure they keep a record of all expenditure over the period of the lease.
Tax rules for holiday lets attract different requirements.