Please Note: This Article is 4 years old. This increases the likelihood that some or all of it's content is now outdated.

New research has shown that over sixty per cent of private sector landlords face being pushed from the basic to higher rates of income tax as a result of Government reforms.

In his Summer Budget, the Chancellor announced that from 2020, mortgage interest relief for residential landlords will be restricted to the basic rate of income tax.

Whilst landlords paying the basic rate might feel unaffected by the change, because tax will instead be applied to turnover, rather than profit, many are likely to find themselves pushed into the higher rates of income tax, despite their income not having increased.  This has now been confirmed by new research by the Residential Landlords Association (RLA).

In a survey of almost 1,200 landlords, of those currently paying the basic rate of income tax, over sixty per cent said that the changes announced by the Government would push them into either the higher or additional rate of tax.

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The RLA has met with officials at the Treasury to raise concerns about the impact the mortgage interest reforms will have on the ability of landlords to invest in much needed new housing.

RLA policy director, David Smith, said

“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 ninety per cent 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.

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.”

  • The RLA represents over 20,000 private sector residential landlords in England and Wales. Further information can be found on the RLA’s website at: www.rla.org.uk.
  • The RLA surveyed 1,199 landlords. Of these, 719 currently paid the basic rate of income tax.

Using a tax calculator developed for the RLA at https://www.rla.org.uk/taxcentre/tax-calculator.shtml:

  • 270 landlords (37.33%) said that they would still be paying the basic rate of income tax post 2020.
  • 418 landlords (57.15%) said that they would be paying the higher rate of income tax post 2020.
  • 31 landlords (4.31%) said that they would be paying the additional rate of income tax post 2020.

Please Note: This Article is 4 years old. This increases the likelihood that some or all of it's content is now outdated.

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