Landlords begin to feel the effect of higher tax bills

Taxation and accounting concept with pen and calculator Print publication


A housing crisis could be on the horizon, as thousands of buy-to-let landlords face going out of business in 2019, when tax rises, introduced by the former chancellor, George Osborne, start to bite, according to Doncaster-based Touchstone Education which runs courses in property investment.

Some of the UK’s 2.3 million private landlords will have faced significantly higher income tax bills last month, following the first stage of the phasing out of mortgage interest tax relief on finance costs. Section 24 of the Finance Act 2015 (also known as the ‘Tenant Tax’) began to take effect in April 2017 and will continue to be phased in over four years. From April 2017, mortgage, loan and overdraft interest costs are not taken into account when calculating taxable rental income, resulting in many landlords paying more tax on their property income.

In addition to the ‘Tenant Tax’, in October 2018, the Chancellor announced that the Government is going to consult on reforming lettings relief so that it only applies in situations where the owner of a property is in shared occupancy with their tenant. This will reduce the amount of capital gains tax relief that landlords receive and reduce the final period of exemption from 20 months to nine months.

WM Comment

If, as some industry experts predict, the buy-to-let market faces a real crisis in 2019 and beyond, the appointment of receivers by lenders may well start to rise again. The number of appointments will be a good barometer of the existence and extent of a failing market. It is important that lenders think strategically about what may well lie ahead and gear up accordingly, both internally and also externally with regard to their associated advisors.