Landlords are raising rents in response to tax changes
It’s been two years since changes to buy-to-let mortgages also changed the way that landlords are taxed. As some had predicted, many landlords have been forced to reconsider their position and think about what the future now holds for them.
How has buy-to-let tax changed?
Before 2017, landlords could deduct mortgage expenses from their taxable profits, including all of the interest they paid for the mortgage on their rental property.
In 2017 this began to be phased out until April 2020. it stopped altogether. This was replaced by a 20% tax credit, which is substantially less for higher rate taxpayers who, under the old system, would have received 40% tax relief.
How has this affected landlords?
These changes in how landlords are taxed have had significant implications for them, with one in three reporting that their portfolio is not as profitable as it was before the changes came in. The same number of landlords have considered selling properties due to the loss of mortgage tax relief.
Apart from the financial impact, the lettings sector is undergoing a raft of changes, with more on the horizon; we recently talked about how the Renters Reform Bill will change things. All these changes and proposals are proving challenging to keep up with, causing 58% of landlords to claim that changing and confusing government legislation is the biggest challenge.
Two options for landlords
In addition to changing legislation, 32% of landlords stated that rising taxes are also a key challenge. To manage the financial impact of these changes, landlords are taking one of two main options – raising rents and selling properties.
25% of landlords said they have increased rents to cover the cost of increasing tax on their tenants, and for landlords with more than 20 properties, this increases to 58% passing on costs.
Around the same proportion of landlords with more extensive portfolios (26%) have reduced the size of their properties to reduce the impact of tax changes. However, the percentage decreases to 13% for landlords with smaller property portfolios.
What does the future hold for landlords?
With more changes to the law on the drawing board that will impact landlords, for example, renting with pets, changes to energy efficiency rating requirements, as well as possible interest rate rises, life for landlords won’t get any easier in 2022.
Ongoing changes and uncertainty in the rental market will continue to have unintended knock-on effects, such as reducing the amount of affordable housing and rental properties on the market.
Despite the challenges, almost 60% of landlords still believe that letting a property is worthwhile. Demand for rental properties is still high, so there is still much for landlords to be optimistic about, so long as they have a realistic business plan, which includes the right support that keeps costs down and maximises occupancy.
No Letting Go
If you would like to discuss how our local support or national network at No Letting Go could become your inventory partner, streamline your costs and reduce your workload, then contact No Letting Go today.
You might also like
Winter Property Maintenance: Essential Checks for Landlords
Upload on October 16, 2024 by Emotio TeamAs part of effective property management, preparing rental properties for winter is key to avoiding costly repairs and ensuring tenant satisfaction. Below are essential checks landlords should perform as winter approaches. 1. Heating Systems and Boilers One of the most critical elements of a rental property in winter is the heating system. Before temperatures drop, [...]
READ MOREUnderstanding Awaab’s Law: What It Means for Property Inventory Management
Upload on October 8, 2024 by Emotio TeamKeyword: Property Inventory Management With Awaab’s Law introduced in the Renter’s Reform Bill, landlords are now legally required to respond swiftly to damp and mould complaints. This new legislation underscores the importance of maintaining up-to-date and detailed property inventory management. Regular property inspections and thorough reports can help landlords identify issues early, document any existing [...]
READ MOREHow to Protect Your Property with a Detailed Inventory Check-Out Report
Upload on September 30, 2024 by Emotio TeamAs a landlord, safeguarding your property at the end of a tenancy is crucial. One of the most effective ways to do this is by creating a detailed inventory check-out report. This report plays a vital role in comparing the property’s condition from the beginning to the end of the tenancy, identifying any damages, missing [...]
READ MOREThe Importance of Home Inspections and Property Inventory Reports: Insights from Merton Council’s Action
Upload on September 4, 2024 by Emotio TeamA recent case in Merton, London, serves as a stark reminder of the importance of regular home inspections and detailed property inventory reports. Merton Council took unprecedented action by seizing control of 18 private properties after the landlord repeatedly ignored tenants’ complaints about poor living conditions. This move, facilitated by powers under the Housing Act [...]
READ MOREGet in touch today
Supporting you and protecting your property are our top priorities.
Get in touch and let us know how we can help.