Six in ten private landlords say that the tax change announced in the summer Budget will force them to pay higher rates of income tax, rather than the basic rate.
Now, industry experts are warning that many landlords could leave the sector.
Tax Changes to Hit Six in Ten Landlords
In the summer Budget, Chancellor George Osborne said that from 2020, mortgage interest relief for private landlords would be cut to the basic rate of income tax. This will be applied to turnover, not profit.
The Residential Landlords Association (RLA) points out that this means many landlords will face paying higher rates of income tax, despite their income not increasing.
In a survey of around 1,200 landlords, of those paying the basic rate of income tax, more than 60% stated that the changes would push them into either the higher or additional rate of tax.
The RLA has met with the Treasury to raise its concerns over the impact of the mortgage interest changes, insisting that it will affect landlords’ ability to invest in much-needed housing.
Policy Director at the RLA, David Smith, says: “The findings of our survey are deeply concerning. Many landlords currently paying the basic rate of income tax face the prospect of a nasty surprise when they meet with their accountants.
“Having felt that they were not affected by the Budget measures, many will seriously consider whether it is worth continuing in the market when faced with this tax bombshell.
“It cannot be right that many landlords face seeing their income tax increase without an increase in their income.
“All the evidence shows that we need more, not less, rented housing. With almost 90% of landlords being individuals renting out just a handful of properties each, it is only by supporting this group that we will boost the supply of homes to rent.”
Smith adds: “The Budget announcements risk undermining the potential for growth.
“Even at this late stage we are calling on the Government to pause and provide more time to assess the impact on market.”1