Accidental Landlord In The UK: What You Need To Know

If you start renting out a property unexpectedly, due to a change in circumstances, that makes you an accidental landlord.

There are many different reasons why this happens and in the UK it’s more common than you think.

It’s estimated that there are 2m accidental landlords in the UK according to HomeServe statistics quoted in IFA Magazine.

On the one hand, becoming an accidental landlord should provide an additional source of income you hadn’t originally anticipated.

But on the other hand, the HomeServe survey warns that unprepared accidental landlords are more likely to encounter avoidable repair expenses. It’s estimated they spent £5.9bn in preventable repair costs in 2023, such as boiler or heating issues and plumbing problems.

If your plans change and you become an accidental landlord, it’s well worth doing a little due diligence and research upfront to be prepared.

That could save you a lot of time and money, helping you mitigate more of the risks early in the learning curve so you can soon focus on enjoying the benefits of being a landlord.

That’s where I can help – in this guide I’ll outline what you need to think about after becoming an accidental landlord.

How do people become accidental landlords?

People can become accidental landlords for a variety of reasons, often due to unforeseen circumstances or changes in their life plans. Here are some common causes:

• • Life stage changes: Life events like a job relocation or moving in with a partner can leave someone with a home they no longer need as their primary residence. They may decide to rent it out rather than sell it immediately – particularly if, for example, the job relocation is temporary.
  • Difficulties selling in a slow market: If the housing market slows down, selling a property can take longer than expected or they can’t get the price they want. This can lead people to rent out the property while they wait for the right buyer.
  • Low mortgage rates: Some homeowners locking in a low mortgage rate in the past may be reluctant to sell their property if it means giving up that rate. Renting allows them to keep the property and the lower rate.
  • Gifting and inheritance: In some cases, people may inherit or receive a property as a gift that they don’t need. They may decide to rent it out as a way to generate income from the property.
  • Sitting tenants: Some people buy a property they want to live in soon, but currently it has a sitting tenant (also known as a tenant in situ) in place until the end of the tenancy agreement.

For more information on the last point, read this guide – what is a sitting tenant?

Implications for your mortgage

One of the biggest traps that accidental landlords fall into concerns their mortgage. If you’ve taken out a mortgage for a property you were living in but are now thinking about renting it out, let your provider know straight away.

You must seek consent from your mortgage provider to start letting out a property you were living in, as the government’s How to Let guide confirms.

Many providers will insist that you switch to a buy-to-let mortgage. If you start renting out your property without telling the mortgage provider and they find out at a later date, they may charge you a fine.

Similarly, you’ll need to notify your insurer that you’re letting out the property, or take out a completely new policy that covers landlord insurance.

Landlord insurance

That’s because standard home insurance covers a property when you are living in it, not letting it out to tenants.

Landlord insurance offers protection against risks that standard homeowner policies may not cover, such as:

• Liability claims: If a tenant is injured on your property and pursues legal action, landlord insurance can help cover your legal costs
• Damage to the property: Landlord insurance can cover your property and its contents from vandalism or malicious damage (but not always as standard, sometimes only as an extra)
• Loss of rent: If your property becomes uninhabitable due to a covered event, some policies will reimburse you for lost rental income while repairs are being made

Depending on the policy, you may also have coverage for the cost of putting up tenants in temporary accommodation if the property becomes uninhabitable.

Rent guarantee insurance, if included, can cover missing monthly rental income if a tenant fails to pay on time.

Landlord insurance is not mandatory, but I highly recommend it for anyone renting out a property. It provides financial protection in case of many different unexpected events.

Accidental landlords – tax implications

Even if you unintentionally became a landlord, you’ll still have tax responsibilities on the rental income you earn. 

You’ll need to register for self-assessment with HMRC. This is how to declare your rental income and any allowable expenses, then calculate your tax bill.

Here are the key accidental landlord tax implications to be aware of:

• Income tax on rental profits: You’ll be taxed on the rental profit, which is the difference between your total gross rental income and allowable expenses incurred for renting out the property
• Stamp duty: There are additional stamp duty considerations for accidental landlords – if buying an additional property on top of the one you’re renting out, you’ll typically pay an additional 3% on standard Stamp Duty Land Tax (SDLT) rates 

How you pay income tax as a non-resident landlord is slightly different. To find out more, read my guide on the non-resident landlord scheme (NRLS).

Advice for accidental landlords – the first tenancy agreement

So far I’ve outlined some of the upfront things that many accidental landlords aren’t aware of when letting for the first time.

But accidental or not, there’s plenty to keep an eye on as a landlord when you have your very first tenant.

This includes brushing up on landlords’ legal responsibilities – the gas safety certificate, energy performance certificate (EPC), tenant right to rent checks, landlord licensing, security deposit scheme and more.

Here’s my advice on some of the key things to watch out for as a first-time landlord:

• Scrutinise applications: Develop a screening process that includes credit checks and references – consider contacting a previous landlord where possible.
• Clear communication: Create a professional tenancy agreement outlining expectations for rent, utilities, repairs, and break clauses.
• Be prepared for repairs: Budget for maintenance issues and respond promptly to tenant requests.
• Stay organised: Keep clear records of receipts and maintenance for tax purposes.
• Rent arrears: If your tenant falls behind on paying the rent, act promptly. Initiate constructive dialogue to seek a swift, satisfactory resolution, but follow the steps outlined in your tenancy agreement if this isn’t possible.

For more tips, let me share my overall guide on how to rent out your house or flat.

If that all sounds like a lot of hard work – it is! That’s why many landlords choose to use an experienced estate agent to oversee the entire letting process.

Final thoughts: What to know as an accidental landlord

There are many different reasons why people become accidental landlords. These include a change in personal circumstances, difficulty selling a property and several other reasons.

No matter your circumstances, immediate priorities to think about are landlord insurance, changes to your mortgage terms and paying the right amount of tax each year. Then it’s time to think about finding the right tenants!

I hope you found this article informative. For other helpful guides on all property matters, take a look at the Fine Living blog.

Recent guides include an explanation on how buying property through a limited company works and an in-depth look at how much it costs to extend a lease on a UK flat.

With more than two decades of experience, rest assured that finding the right tenant and overseeing the letting process is no trouble at all here at Fine Living! 

To ask about a property in the Fine Living portfolio, or if you have any queries about renting out a property for the first time, please don’t hesitate to get in touch.

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