Managing your Tenancy FAQs

If my tenant leaves their fixed-term tenancy agreement early, must they still pay the rent?
Your tenant can give notice to end their tenancy agreement provided they can find an acceptable replacement tenant for you. If they can't find a replacement tenant, they will be responsible for the rent until the end of the tenancy agreement, even if they have physically left the buy-to-let property.
If I rent out a room to a lodger, are there any tax breaks? Can I rent a room tax free?
If you rent out a room in your house to a lodger and you are an owner-occupier, or a tenant who is sub-letting, the first £7,500 of any income is tax free under the Rent a Room Scheme, i.e. a rent of £144.23 per week is tax free.

This means that you have in your own house access to over £7,000 income tax-free every year!

If the rent is higher than £7,500, you either elect to pay tax on the surplus above £7,500 (without relief for expenses) or you can treat the arrangement as being a furnished letting and prepare accounts.

This relief is available whether you rent out just one room to a lodger or you run a bed & breakfast business from your house.
What are the tax implications if I let out my holiday home?
The definition of furnished holiday lettings is as follows:

• The accommodation must be available for holiday lets for at least 210 days per year.

• The accommodation must be commercially let for at least 105 days in the year.

• No let is to exceed 155 days.

There are special rules for the years of commencement and cessation. The income is treated as earned income (a trade) attracting Capital Gains Tax rollover relief and Entrepreneurs’ Relief. Tax-saving ideas worth thinking about:

• Rollover of capital gains on the sale of trading assets into the purchase of holiday accommodation.

• Any gain on the sale of the holiday accommodation may eventually attract Capital Gains Tax at only ten per cent.

• You can claim capital allowances on furniture and equipment.
What are the tax implications if I let out furnished property?
If you receive income from furnished lettings, it’s taxed under the property income rules.

If you provide laundry, meals, domestic help, etc. for your tenants, then you may be able to claim that you are running a self-employed business – as you usually can if you are providing holiday lettings. The advantage of running your property enterprise as a trading business means that there are usually more expenses you can claim against Income Tax and, in addition, you may be able to claim Entrepreneurs’ Relief for Capital Gains Tax and business property relief for Inheritance Tax purposes. However, this does depend to a large extent on the amount of services you are providing.
How can I reduce the time between my old tenant leaving and a new tenant moving in?
Here are five tips:

1. Decorate your property in a neutral style.

2. Buy rental property in high demand areas.

3. Be less fussy about the type of tenant you are willing to accept.

4. Buy a type of property for which there is high demand.

5. Advertise the property in plenty of time before the end of the current tenancy.
What can I do to improve the chances of letting a property?
To increase your chances of finding a tenant and letting your property you can try these ideas (in this order):

Reduce the rent: If you can't let your property at the price you want, then try reducing the rent - even as little as £5 per week less can make a difference.

Be less picky: For example, if you've asked for non-smokers, then consider smokers. A local cleaning company may be able get rid of the smell quite easily.

Put furniture in the property: This will be expensive and is no guarantee that the place will attract tenants. Consider this if you are getting calls rejecting the property because it's unfurnished.

Consider selling the property: This is a drastic step, because most properties in the UK are lettable - it's just the rent you are asking for that might put off possible tenants. However, if you are experiencing trouble letting it, think about getting out! You could sell it and buy something else.
What are the rules for private residences and Capital Gains Tax relief?
Normally, the house or flat in which you live is exempt from Capital Gains Tax when you sell it. The property must have been your only or main residence during the period of ownership. During the last 18 months of ownership (nine months with effect from 6 April 2020), the property is always regarded as your main residence even if you don’t live there. Note that people who move into a care home, or have a disability, can claim for the last 36 months of ownership. You can also be absent for periods totalling three years and for any period throughout which you worked abroad. To qualify for these additional periods of exemption, you must live in the property both before and after the absence. In addition, if you had any work which required you to live in job-related accommodation, that also doesn’t stand against you for Capital Gains Tax purposes. Any periods of absence in excess of the periods allowed result in the relevant proportion of your sale profit being charged to Capital Gains Tax.
Is there an annual exemption from capital gains tax?
Every year, there is an annual exemption from Capital Gains Tax. In the year 2019/20, your first £12,000 of gains is exempt. In the case of trusts, it’s £6,000.

The rate of Capital Gains Tax (CGT) is 20 per cent for trusts (28 per cent for disposals of residential property).
What can I set against my capital gains tax liability?
Apart from the annual exemption, you can set the costs of acquisition of the asset, including purchase price, and the sale costs, against the gain.

In addition, if you bought an asset on which you have incurred enhancement or improvement expenditure, then that too will be allowed as a cost. Certain costs such as accountant’s fees are not allowed, but if you are looking for allowable costs, and because this subject can be so wideranging, we suggest you talk either to a professional accountant or to HM Revenue & Customs (HMRC).

(Taken from Lawpack's 'Tax Answers at a Glance'.)
When buying a property, should I check the central heating?
Yes, ask to see last year's receipts for the fuel used. If it's a system such as gas, ask if it has been regularly serviced. Find a radiator at the highest point in the house and as you turn the air-release screw hold a lighted match to it. If you set up a lighted gas jet it isn't because gas has got into the system, it is the product of some corrosion that has started. It might only need some anti-corrosion fluid putting in the system - on the other hand that might not be sufficient. In any case, all the more reason to have a careful look round for leaks particularly at joints. Leaks also tend to make nasty stains on carpets.
Can I get tax relief on my mortgage interest?
If you live in the property yourself, the short answer is ‘no’. But if you mortgage your house in order to buy a rental property, the answer will be ‘yes’ - you can set off the mortgage interest against your rental income.

But note that a major change has been introduced to the way that landlords claim relief for mortgage interest against their rental income. Historically, the amount of interest paid has been claimed as an expense against the rental income; the consequence of this being that if a landlord was a higher rate taxpayer, he in effect got tax relief on the loan interest at 40 per cent.

From 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.
My buy-to-let property has "caused" an injuy to the tenant. Can a tenant make a claim against a landlord for this?
In some circumstances, a landlord may be liable for defects on the property rented out which cause personal injury to his/her tenants (and in some cases to others, lawfully at the property).

Most arrangements relating to residential property create a lease (whether oral or written) and a relationship of landlord and tenant is created.

You duty, as landlord, in relation to hazards on the rental property or to the condition of your buy-to-let property depends on whether the defects arose due to your own positive actions, and whether the defects occurred before the lease was created or while you were in situ.
How do I go about increasing the rent on my rental property?
There are three ways for a landlord to increase the rent payable on an assured shorthold tenancy:

1. By agreement with the tenant – you can normally do this by issuing to your tenant a new fixed-term tenancy agreement, which outlines to your tenant the new rent amount. If they agree to the rent increase, you can alternatively get your tenant to sign a Rent Increase Agreement (which is included in our Rent Increase Kit), but the Rent Increase Agreement can only be used once the fixed term of the tenancy has come to an end. If the tenant agrees to the new rent, they will not be able to subsequently challenge the rent increase.

2. Following a rent review clause in the tenancy agreement. Your tenant will normally be deemed to have agreed to this by signing the tenancy agreement, so again will be unable to challenge the rent increase.

3. By giving notice of the rent increase using a Section 13 Rent Increase Notice (which is included in our Rent Increase Kit). You can serve this once a year but the Rent Increase Notice can only come into force during a periodic tenancy (i.e. after the fixed term has expired).

It's difficult for a landlord to increase the rent without the consent of the tenant during the fixed term of the tenancy, as the tenant is under no obligation to agree to a rent increase and cannot be forced to do so. The only tactic a landlord can do to force a rent increase is to serve a Section 21 Notice to terminate the tenancy and, therefore, give the tenant a choice of either signing a new tenancy agreement at a higher rent or vacating the property at the end of the fixed term.

If the tenant feels that the rent is too high, they can refer the matter to the Rent Assessment Committee for review.
My tenant has moved out but she’s left stuff in the property. Some of it looks like rubbish, but there is also kitchenware, clothing and some furniture. I'm assuming she can't be bothered to get rid of it. Is it OK if I do so?
Even if the stuff your tenant has left looks like rubbish, you still need your tenant’s permission before you can dispose of it. However, you can remove the items from your rental property and store them, so that you can let out your buy-to-let property to other tenants.

It's advisable to get it in writing from your tenant that she is happy for you to get rid of her possessions. If you can’t get in touch with her informally, then write to her by recorded delivery and ask her to collect her stuff within a reasonable time period (e.g. four weeks).

Give her your contact details, details of the goods she has left behind and where you are storing them. Inform your tenant that if she doesn't collect them, you will sell or get rid of them. Keep a copy of the letter and the recorded delivery slip, so you have proof that you tried to contact her.

If you don’t have a forwarding address for your tenant (and you should always try to get one), you need to show that you have made every reasonable effort to trace her before you dispose of her goods. You could use a tracing agent to find a tenant, who offer "no-find, no-fee" arrangements.

If you still can’t contact your tenant, you can get rid of her stuff in the most advantageous way possible. If her goods are of any worth, don't dump them; sell them. Any money you earn from selling your tenant's stuff is strictly speaking her’s, but you are entitled to deduct any costs you have incurred in selling them (e.g. eBay fees). But do keep a record in case your tenant turns up later demanding her goods – this does happen.
I’m renting out my flat and have an offer from a potential tenant who has a small dog. What can I do to ensure that my flat stays in good condition?
The first thing you need to do is check to see if your lease allows you to have animals in your property. If your lease gives permission and you are considering accepting your potential tenant's offer, then try to find out a bit more about the animal – how big is the dog, what is its breed, is it noisy, how long will your tenant leave the dog on its own in your rental property.

If you're worried about your flat's condition, ask for a bigger deposit from your tenant and add clauses to the lease. You can ask for your rental property to be professionally cleaned at the end of the tenancy or ask the tenant not to leave the dog on its own overnight. This should help to keep potential damage to your rental property to a minimum.
My tenants are moving out in two months and I want to make sure that my rental property remains full. How can I make the property appealing to tenants?
"Avoid the voids" as much as possible by advertising your rental property as soon as your tenant gives notice. Don’t wait for your tenants to move out, as it’s costing you time and money.

Advertising your rental property is very important. To find the best tenant, you must advertise your buy-to-let property in as many places as quickly as possible, as potential tenants are not going to look at just one website.

Always advertise with good photographs and make sure that your rental property is tidy. Try to make your photos as professional as possible.

Always include a photo of the living room and don't focus on the exterior of your rental property. Tenants are keen to see the inside far more!

Regarding pricing your rental property, make sure that you price yourself a bit more competitively than the market. If local landlords are mostly advertising their rental properties at £400 a week, advertise your rental property at £390. You will lose £500 a year, but you will increase your chances of avoiding a costly void period.

Make your buy-to-let property as desirable and well-priced as possible to attract more potential tenants. Then you have the option of choosing the best tenant, rather than having to settle.
I'm a landlord and my neighbours have complained to me that my tenants are making noise. How do I bring this up with my tenants, as we generally have a good relationship?
As a landlord, you have two options. Firstly, you could suggest to your neighbours that they address the problem with your tenants and see if they can come to some amicable agreement regarding the noise problem. If you don’t want to get your neighbours involved with your tenants, then secondly, you should speak to them directly.

If you have a good relationship with your tenants, it's vital that you don't go in guns blazing. Before speaking to your tenants, find out from other neighbours whether there really is a problem.

If the other neighbours are unaware of any noise, then you need to speak to the neighbour who complained and explain that nobody else has got a problem with the noise. But if the other neighbours do agree with the person who is complaining, then you need to speak to your tenants.

Ask your tenants politely and in a friendly manner if they can try to curb their noise a little bit. If this doesn’t work, then put it in writing. Most tenancy agreements include a clause that prohibits tenants from making excessive levels of noise out of hours.

After you have addressed the noise problem with your tenants, keep in touch with your neighbour who made the complaint and see if things are improving. If things do not, then as a last resort you may have to take legal advice.

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