Buy To Let Market Falls After Tax Changes Imposed On Landlords

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May 24th 2022
Tax Week 7
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Buy To Let Market Falls After Tax Changes Imposed On Landlords

60 percent drop in sales of investment property according to NLA.

Punitive measures imposed on landlords by former Chancellor George Osborne in his Summer 2015 Budget meant increased stamp duty, phasing out of mortgage interest tax relief and the removal of the ten percent 'wear and tear allowance'.

Next week marks the first stage of the reduction in the amount of mortgage interest on which a landlord can claim tax relief. For the 2017 tax year, only 75 percent of mortgage costs will be allowed as a deduction from rental income before calculating tax. The remaining 25 percent of mortgage costs will be given as a basic rate tax deduction. The ratios will shift to 50/50 marginal rate deduction to basic rate deduction in 2018, 50/75 in 2019. From 2020 all mortgage costs will only be allowed as a basic rate tax deduction off the landlords tax bill.

The 'National Landlords Association' now reports that this is the likely cause of a 63 percent drop in the growth of new purchases in private rental sector compared to the growth of property purchases by owner/occupiers. Their research also highlights that future sentiment from landlords toward expanding their portfolios is negative with only 16 percent looking to buy property in the coming year.

Existing landlords are also more likely to attempt to shave the number of property they own - 16 percent are looking to sell in 2017. The forecasts for 2018 show landlords selling more than buying due to the combined tax effects.

Landlords can use the Buy to Let Tax Calculator to gauge the effect of the rules changes on the property they hold. The simple calculator gives an overview of taxation on a per property and per tax year basis. This includes disposals and any exposure to capital gains taxes.

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