The most recent analysis from AXA has revealed that as a result of the phasing out of mortgage interest tax relief, more landlords believe they will be affected than Government estimates.
Changes to mortgage interest tax relief calculations come into force from today, with AXA’s figures suggesting that half of landlords plan to quit the market by 2020. Many cite the fact that they are being unfairly targeted.
AXA’s research indicates that over 40% of landlords feel they will be worse off as a direct result of the tax changes. This comes despite Government estimates that 82% will not have any additional tax to pay.
However, AXA’s research suggests that today’s change, coming on top of a host of legislation targeting landlords in recent years, means that many will leave the sector by 2020.
21% said that they plan to sell all of their portfolio, while 10% plan to reduce. 7% said that they will move to a commercial property ownership. 8% said they plan to transfer ownership of their property to a spouse or other family member, who is in a lower tax bracket, thus avoiding tax.
50% of landlords could quit sector due to tax changes
Two-thirds of landlords questioned said that they feel stigmatised for running their rental business.
The stark reality is that only 4% of private landlords have a portfolio large enough to give up work and live off the profits. On average, the typical UK landlord makes £343 rental profit every month. Profit levels do vary widely across the country, from £297 in the West Midlands to £713 in London.
Gordon Rutherford, Head of Marketing at AXA Insurance, noted: ‘Landlords have been subject to one piece of new legislation after another in recent years, much of it very complex indeed. We see a real confusion as to what the new tax changes will mean, with Government and landlords giving very different estimates of the impact.’
‘We need to remember that few landlords are professional property tycoons: two thirds in the UK are ‘accidental’ landlords. They tend to own just one rental property that they’ve inherited or are finding hard to sell, and they make a modest income once time and expenses are out. They do feel increasingly apprehensive, as we can see from the numbers thinking of withdrawing their properties from the rental market in the coming years,’ Mr Rutherford added.