The Government’s raft of tax changes has hit landlords’ investment plans, with 52% deterred from buying more properties, finds a new survey.

An LSE study for the National Residential Landlords Association (NRLA) found that despite the seismic impact of Covid, tax changes had affected their plans more than the pandemic.

Its survey of more than 1,400 private landlords across England discovered increasing regulation and bureaucracy along with the government’s negative messaging about private landlords and their role in the housing market had also played a part.

Landlords felt vilified and under attack from the Government and, the report said, “the emotive tenor of many comments and the near unanimity of views were striking”.

Recent changes have included restricting mortgage interest relief to the basic rate of income tax, a 3% stamp duty levy on the purchase of additional homes and a decision to cut Capital Gains Tax to 18% for everything other than on gains from the sale of residential property.

Greatest effect

Overall, a third of respondents said the reform to mortgage interest relief was the tax change having the greatest effect on their rental business. Of this group, 39% said the change meant that they were not going ahead with planned future purchases while 31% had put plans on hold and 28% were taking steps to leave the sector altogether.

Another 60 former landlords said their main reasons for leaving the sector were rising costs, tax changes and potential regulatory change.

The study’s authors said individually and cumulatively, the recent changes had reduced the incentive to be a landlord in England.

The add: “These indications may herald the start of a contraction of the sector, unless the economic environment changes. Disinvestment will probably be led by those economically motivated landlords most affected by the recent changes.

“This includes highly leveraged individual investors who are higher- and additional-rate taxpayers as they can no longer deduct mortgage interest at their marginal tax rates.”

Read more about stamp duty.

3 COMMENTS

  1. This Government are replicating the period before Mrs Thatcher, increasing the burden on Landlords until they all say ‘no More’ and leave the sector.
    I have been a Landlord since 1970 but have sold 75% of my holdings this year with the balance going when Making Tax Digital comes in.
    The Government can do it themselves !.
    Terry Bown

  2. 50% of the PRS is leveraged and is the part of the PRS that is most at risk from bonkers Govt policies.

    Mortgage free LL are far better able to cope with the vicissitudes of being a LL.

    Loss of income caused by a rent defaulting tenant has far less effect on a mortgage free LL.

    As long as the completely dysfunctional process remains then every LL requiring repossession will suffer from court costs and rent default.

    Rich LL before 1997 were able to cope with rent defaulting as they were rich!

    Leverage has exposed Leveraged LL to bankruptcy.

    Repossession difficulties fundamentally undermine the leveraged business model.

    RGI is rarely available.

    This a most tenants are of too low quality to qualify for RGI.

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