People become a landlord either to make a living or to make a bit of extra cash, so it is very important to ensure they get the most out of their investment. However, we are living in turbulent economic times, and everything has gone up, including energy costs and mortgage rates after the Bank of England increased the bank rate to 5.25% in 2023.

What does this mean for landlords? Well, it means that it could be a bit trickier to expand your property portfolio given that the price of borrowing for mortgages is up.

Let’s address the financial issues for landlords in today’s economic landscape.

Rent arrears

In the 12 months up to June 2023, rent rose by 5.1% across the UK, and higher in certain areas. So, it’s not difficult to understand how tenants may fall into rent arrears. On the flip side, most landlords rely on rent payments in order to pay their own mortgages and bills, so owed payments can have a nasty knock-on effect. Rent arrears are ‘priority debts’ which can ultimately lead to eviction if the issue snowballs. The new Renters Reform bill enables landlords to issue a section 8 notice if a tenant has previously been in two or more months of arrears on three or more occasions over a three year period, even if the tenant in question isn’t in rental arrears at the time

Be sure to act quickly in the event of late rent payments to avoid being out of pocket for too long. Once you get a Section 8 notice through the courts, it must give tenants 14 days to leave your property before you can repossess it.

Image of bar graph indicating prices going up.


Taking tenancy deposits from a tenant is optional for a landlord, however, it is strongly advised that you do this as part of your tenancy agreement. Deposits can act as a landlord’s financial safety net should problems arise at the end of a tenancy and unforeseen costs come into play. By law, you cannot keep your tenant’s deposit in one of your savings accounts, you must keep it in a government authorised tenancy deposit scheme within 30 days of receipt. Failure to do so could result in a tenant bringing up a claim against you for up to three times the deposit sum!

Tenancy deposit schemes ensure that tenants can get their deposit back if they stick to the terms of the tenancy agreement, don’t damage the property and pay all of their rent and bills on time. If a dispute should arise, the deposit is protected until it is resolved.

Renovation costs

Chances are, the time will come when you will need to renovate your property in some capacity. Whether that’s because you’ve been the victim of damage, been hit by some wear and tear or simply fancy sprucing the place up – it’s important to have money put aside for keeping your property in shape. Many landlords choose to re-decorate around once every five years to keep things fresh – plus, improving your rental property with refurbishments can add a lot to a property’s capital value and rental value.

The thing is, materials and labour are expensive these days, so you need to make sure you can still make rental yields after factoring in renovation costs. An average full kitchen renovation in 2023 costs around £11,200. If you are a dab hand at DIY, you could always take care of property upgrades yourself to save you a few pounds. The aver

In the event of your tenant damaging the interior of your property, you may be able to withhold part of their deposit in order to cover the costs. Be careful not to confuse these damages with fair wear and tear, as this is your responsibility to pay for. In reality, you won’t receive your property back in the pristine condition you handed it over at the beginning of the tenancy – and that’s okay. It’s important to remember that the property has been lived in. However, if you find burn holes in the carpet or nail varnish spills, you can deduct the cost of your carpet replacements from your tenant’s deposit.

Image of a kitchen renovation.


It pays to be diligent when it comes to your tax and for landlords, it can get pretty tricky since there’s a lot to think about and consider – especially as the legislation is always changing. These include a stamp duty surcharge on additional properties, making it very expensive to start or add to your property portfolio, as well as the removal of mortgage interest tax relief. Property income can also no longer be claimed as a business expense but is now subject to income tax.

On the upside, you now get up to £1,000 tax free on property income each year.

Landlord profits and the cost of living crisis

Once you buy a property to let, you can earn a profit from it in two ways: rental yield, the sum of what your tenant pays in rent minus any maintenance and running costs and capital growth, the profit you earn if you sell on your property for more than you paid for it. The early 2010s was a good time to be a landlord, with healthy profits and benefits following the financial crash.

However, the cost of living crisis and the rise in interest rates have made making a decent profit on your rental property become increasingly difficult.

After shedding some light on financial issues for landlords, we hope you feel ready to tackle any problems you may face. To get yourself prepared for situations like loss of rent, have you considered landlord insurance? With CIA Landlords, you can compare landlord insurance to get the best quote for your needs. To learn more, contact us or get a quote today.

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