Real Estate

Government’s tax raid on landlords hitting investment levels hard

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.

Source
Government’s tax raid on landlords hitting investment levels hard is written by Nigel Lewis for www.landlordzone.co.uk

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