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Landlords slam tax changes as 440,000 face 2017 rate hike

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Around 440,000 landlords who pay the basic rate of tax will be forced into a higher tax bracket from Apriil next year, according to the National Landlord Association.

The changes, to be fully phased in by 2021, will mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.

Currently, mortgage interest payments are one of a number of expenses that landlords can deduct as a business cost.

The NLA is lobbying housing and planning minister Gavin Barwell on the issue.

NLA chief executive Richard Lambert says: “When the Government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh.

“The Government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.

“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. I’m curious as to why Richard Lambert assumes that this would either force up rents, or make landlords sell up and move out of the market and or why the 2nd point would necessarily be a bad thing?

    It will affect the “profit” that the landlord makes, so they could have the option to make less profit? Plus rent tends to be dictated by the market, not any specific individual landlord.

    Plus having a potentially significant amount of BTL’s hit the market, would increase supply to people that want to buy to live in, and might therefore lower prices and go somewhere towards stopping many FTB’s being priced out of the market.

    I would suggest that the only people that it’s a “bad thing” for are a smaller number of landlords. Clearly time will tell.

    • There are differing points on whether this will be a good or bad things for tenants or the market as a whole but for landlords the major bad thing isn’t that they will make less profit its the issue that the tax bill could exceed the physical cash profits. You only have to run numbers through the online calculators available from some BTL lenders to see how this will force landlords to adjust their income or property holdings – i.e. put rents up or sell up.

  2. @ Duncan Gafney
    You are totally right Duncan. Of course Richard Lambert is bleating about this. He would, wouldn’t he? The rush into BTL has had an adverse impact on young people, by adding to the ridiculous cost of properties in some parts of the country, over the last decade or two and it is about time the situation was reversed.

  3. Also, let’s not forget that in the Budget GO announced the introduction from 6/4/17 of a new Property Income Allowance of £1,000pa – here is the paragraph from the report:-

    From April 2017, the government will introduce a new £1,000 allowance for property income. Individuals with property income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way, or by simply deducting the relevant allowance.

    So although gross income will still be higher – possibly pushing people into the higher rate tax threshold at £45,000 from 6/4/17 – for those with maintenance costs/expenses less than £1k or £2k if held jointly, may pay less.

  4. And lieth one of the dangers of illiquid investments such as direct holdings of bricks & mortar.

    Let’s not forget that other asset classes have been, from time to time, subject to changes in their tax treatment. And investors in those have had to live with it (or sell-up).

    Why should UK BTL ‘investors’ be subject to any preferential treatment? Get over it.

    I’m with Patrick on this one, we need to see a BIG correction in house prices to get back to some form of normality where young(er) people can afford to buy their own home….and not by borrowing at an artificially low rate of mortgage interest. Otherwise, as a society, we’re bu%%ered!

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