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BTL tax changes are making portfolios less profitable – survey

Landlords’ portfolios are not generating the same income as they once were, as many are concerned about the future of the rental market, according to a new report from Simply Business.

The study of over 600 UK landlords found that one in three (33%) landlords said their properties are not as profitable due to the reduction of buy-to-let mortgage tax relief, which started in April 2017. 

Here, PIT reproduces the findings below.


Controversial tax changes have increased costs for tenants

The mortgage interest tax relief landlords could claim was gradually reduced by 25% each year. The changes started in April 2017 and reached zero in April 2020, when buy-to-let mortgage relief was replaced with a 20% tax credit. 

The controversial tax changes have reduced profits for many landlords, who were previously able to deduct all of their mortgage interest from their rental income and pay tax solely on their profits.

One in three (32%) landlords surveyed said rising taxes are one of their key challenges, while over a tenth (11%) said they’ve had no choice but to pass the cost of tax increases onto their tenants in the form of higher rents.

For 16% of landlords, the impact of the buy-to-let mortgage tax changes has caused them to sell a property or consider selling one.

Further regulation and rising costs are top landlord concerns

With the government announcing plans to introduce a national landlord register and scrap Section 21 evictions earlier this year, half of landlords (50%) said they’re worried about further regulation of the rental market.

This comes at a time when there’s much uncertainty in the market, with three in five (58%) landlords claiming that confusing and rapidly changing government legislation is the biggest challenge they currently face. 

Just under half (45%) of those surveyed said that the rising cost of being a landlord is the most significant threat to the future of the rental market. As a result, almost one in five landlords (18%) said they’re worried about the knock-on effect it could have on their ability to maintain their properties.

Some landlords remain positive about rental returns

Despite the impact of buy-to-let tax changes, a fifth (22%) of landlords said they would reconsider selling their properties if they had more clarity on legislation and regulation from the government. 

Just under one in five (18%) remain optimistic about their ability to generate income and almost a third (29%) said they expect to see their rental yield increase by up to 5% this year. 

Meanwhile, almost a quarter (23%) of landlords said they’re planning to buy another property this year.

Landlords continue to feel the squeeze

Alan Thomas, UK chief executive officer at Simply Business, comments: “With countless changes to regulations, along with rising costs over the last few years, landlords are feeling the squeeze. Our study has revealed the worries faced by those in the UK, with many questioning the value of their portfolio and some even considering selling.”

“Contributing over £16 billion annually, if a wave of residential landlords were to sell up then it would have a huge impact on the UK economy. What’s more, with landlords offering much-needed accommodation to over 4.4 million households, the hit to our communities could be devastating.”

Thomas concludes: “It’s crucial that we recognise both their importance and the support required by landlords to manage the challenges they face – including changes to government legislation, such as the reduction of buy-to-let mortgage tax relief.”


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