Landlords
If you're thinking of renting out your property there are a few things to consider. This guide explains what it means to be a landlord and how you can become one.
What is a landlord?
A landlord is someone who lets out a property for tenants to live in. They pay rent in return.
People who do this in the private rented sector are private landlords.
They must follow rules laid out in the Landlord and Tenant Act 1985 and the Housing Act 1988.
The number of households living in the private rented sector in the UK went up from 2.8 million in 2007 to 4.5 million in 2017. That’s an increase of 1.7 million (63%).¹ This data is from the Office for National Statistics (ONS).
Some landlords let one or more rooms to lodgers in the property they live in. They’re known as live-in landlords.
Most landlords let a whole property to tenants and live somewhere else. They have different rules to live-in landlords.
This guide applies to landlords who let a whole property.
You might become this type of landlord to:
make money by buying a property and letting it
let a property you used to live in, while you live elsewhere
let a property you've inherited
Landlords who own more than 4 rented properties are portfolio landlords.
How much does it cost to be a landlord?
Unless you own the property outright, your mortgage will be your biggest cost as a landlord.
You could keep your residential mortgage if you only want to let your home for a few months.
To do this you’d need permission from your lender. This is known as consent to let.
Your lender might charge you a fee for this. They may also put up the interest rate for the period.
If your lender will not give you consent to let, you’ll need to switch to a buy to let mortgage.
This type of mortgage is for landlords.
You tend to need a bigger deposit for a buy to let mortgage.
Buy to let mortgages usually have bigger arrangement fees and higher interest rates.
More about buy to let mortgages.
Other landlord costs include:
maintenance
repairs
insurance
tax
letting agent’s fees
ground rent and service charges (if a leasehold property)
licensing
annual gas safety checks
smoke and carbon monoxide alarms
deposit protection fees
eviction costs
A landlord’s responsibilities
Landlords have many responsibilities.
As a landlord you need to:
keep the property safe and free from health hazards
get an Energy Performance Certificate (EPC) for the property
make sure all gas and electrical equipment is safely installed and maintained
protect your tenant’s deposit in a government approved scheme
check your tenant’s immigration status under Right to Rent rules
give your tenant a copy of the ‘How to rent’ checklist ²
give your tenant a copy of the Assured Shorthold Tenancy (AST) agreement
make repairs to the property
provide smoke alarms and carbon monoxide detectors
only end tenancies under the rules set out in the Housing Act 1988
A landlord's rights
As a landlord you have the right to:
enter your property to inspect it or carry out repairs. You must give 24 hours’ notice
enter the property in an emergency
get the rent as agreed in the tenancy agreement
increase the rent once a year
repossess your property at the end of a fixed term tenancy if you've given the correct notice period
bring a tenancy to an end, using conditions laid out in the Housing Act 1988
sell the property
Do I need landlord insurance?
There is insurance you might need as a landlord including:
landlord buildings insurance
landlord contents insurance
rent guarantee insurance
home emergency insurance or landlord boiler cover
liability insurance
legal expenses cover
The cost of landlord insurance varies depending on the:
type of cover you buy
size of the property
location of the property
You should always compare landlord insurance before buying a policy.
How much tax do landlords pay?
As a landlord, you pay income tax on the profit you make from your rental property.
To work out your profit, add your rental income up and take away the cost of expenses and allowances.
These might include:
maintenance and repairs costs
letting agent’s fees
landlord insurance
You can also take away a part of the interest you pay on your buy to let mortgage. This relief has been reduced to basic rate tax (20%).
Your rental profits are taxed at the same rates as income you get from your job.
This is 20%, 40% or 45%, depending on which tax band the income falls into.
You’ll usually need to fill in a self assessment tax return if you earn money from letting a property.
As a landlord, you pay income tax on the profit you make from your rental property.
To work out your profit, add your rental income up and take away the cost of expenses and allowances.
These might include:
maintenance and repairs costs
letting agent’s fees
landlord insurance
You can also take away a part of the interest you pay on your buy to let mortgage. This relief has been reduced to basic rate tax (20%).
Your rental profits are taxed at the same rates as income you get from your job.
This is 20%, 40% or 45%, depending on which tax band the income falls into.
You’ll usually need to fill in a self assessment tax return if you earn money from letting a property.
How to register as a landlord in England
Currently, not all landlords in England have to be licensed or registered.
Different councils take different approaches to landlord registration.
In some areas, all landlords must be licensed. Check your local council to see if you do.
If you let a HMO you’ll need a licence from your local authority wherever you are in England.
You must have landlord registration if you let a property in Scotland or Wales.
Landlord checklist
Make sure the rental property is safe
Get the right type of mortgage
Get an up to date EPC
Reference and credit check your tenants
Use an assured shorthold tenancy (AST) contract
Protect your tenant’s deposit
Decide if you need landlord insurance
Pay the right amount of tax
Understand eviction procedures
Obey licence rules
Decide if you need to use a letting agent
Consider joining the National Residential Landlords Association
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Your home could be repossessed if you don't keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
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Sources
¹ ONS: Home Economy Inflation and price indices. UK private rented sector: 2018
² GOV.UK: Guidance - How to rent