Landlord tax changes see one-in-four sell their properties

Changes to mortgage interest relief (MIR) for British buy-to-let landlords has resulted in one-in-four opting to place their properties on the market, according to new research by the Residential Landlords Association (RLA).

In addition, one-in-five (20%) are seeking to create their own limited company in response to the taxation reforms of the buy-to-let sector.

The RLA’s overall review of developments in the buy-to-let market in 2016, based on quarterly reviews of some 2,883 UK landlords, suggests that current taxation reforms to the landlord sector have had a largely negative impact on any future investment decisions by landlords.

More than three-quarters (77%) of landlords surveyed said the recent changes – including the additional stamp duty charge on second homes and the reductions to the wear and tear allowance – will harm their rental income.

In addition, more than two-thirds (67%) of landlords surveyed confirmed they would be less profitable as a direct consequence of the MIR changes.

RLA statistics indicate that, for an average UK landlords, profitability could decline by as much as a third (34%); while 36% of landlords said the removal of MIR would result in them making a loss on their property investments.

The vast majority (78%) of landlords also stated that the latest changes to the taxation regime have resulted in them opting out of investing in any additional properties.

Between 2017 and 2020, the amount of buy-to-let tax relief that property landlords can claim back will decrease over time; reducing progressively from 45 per cent to 20% for top rate taxpayers.

However, this particular change does not impact upon property landlords who operate their rental incomes via a limited company.

If you’re at all concerned about your tax liabilities as a property landlord or owner of a second property, your local TaxAssist Accountant can offer professional advice regarding all aspects of buying, selling and letting property.

To find out more, simply call our friendly team today on 01224 637100 or drop us a line using our online enquiry form.

Date published 23 Jan 2017 | Last updated 23 Jan 2017