More single property landlords expecting tax change fallout

by Gary Whittaker

More single-property landlords are expecting to have to pay higher rates of tax than ever before due to recent changes. According to the latest figures from the National Landlords Association (NLA), 16 per cent of these landlords think they'll need to pay more tax due to alterations to mortgage tax relief.

The number of single-property landlords expecting to get pushed into the higher tax bracket due to the changes increased by seven per cent compared to the last quarter of 2016. This could affect investment in the buy-to-let sector and availability of rental properties. 

Changes to mortgage tax relief will be fully implemented by 2021, at which time a landlord's mortgage finance costs will be counted as taxable profit. As the market currently stands, this can be as much as £5,600 for landlords with a single property. 

According to the NLA, this could see more landlords pushed into the higher 40 per cent bracket, especially if they are currently operating just below the £43,500 threshold. It would mean having to pay a significant amount more in tax, which could seriously impact final earnings from rented properties.

The threat of paying more tax is likely to make many landlords start selling properties, said the NLA, which puts many young renters and families at risk of being evicted. 

In order to continue making the same amount of money from a property when faced with the high tax bracket, the NLA said landlords will need to increase rent by as much as 11 per cent. This could see rent rises of over £100 per month for an average rental property, which could put them out of the price range of many renters.

Richard Lambert, chief executive of the NLA, said: "Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years.

"More and more families and young couples are making their home in the private rented sector because they cannot either access social housing or afford to buy their own home. Affected landlords will have the choice of either increasing rents or selling up, so either way, it’s the people they currently home who look likely to suffer the most as a result of this damaging tax change.

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24-May-17General Lettings News