The scale of the tax upheaval facing private landlords has become clear, with six in ten saying t...
The scale of the tax upheaval facing private landlords has become clear, with six in ten saying they face being pushed from paying the basic to higher rates of income tax as a result of the new regime.
Top lawyer David Smith described it as a bombshell, warning that landlords could quit the sector en masse.
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.
However, this will be applied to turnover, not profit.
The Residential Landlords Association says this means that many more landlords will find themselves pushed into the higher rates of income tax, despite their income not having increased.
In a survey of almost 1,200 landlords, of those currently paying the basic rate of income tax, over 60% said that the changes would push them into either the higher or additional rate of tax.
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 and EYE legal contributor 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 90% 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.”
See also our other story on the size of the buy-to-let market and lenders’ concerns over the tax changes ahead.