Over 60% of private landlords face being pushed from basic to higher rates of income tax as a result of reforms announced in the Summer Budget.
This is the key finding of a survey of over 1,000 landlords carried out by the Residential Landlords Association (RLA).
In July's Budget it was announced by the Chancellor George Osborne that from 2020, mortgage interest relief for residential landlords will be restricted to the basic rate of income tax.
The RLA says that while landlords paying the basic rate might feel unaffected by the change, because tax will instead be applied to turnover, rather than profit, many are likely to find themselves pushed into the higher rates of income tax, despite their income not having increased.
“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,” says RLA policy director, David Smith.
He says that many landlords will seriously consider whether to remain in the private rented sector when faced with an increase in tax costs despite not experiencing an increase in their income.
“All the evidence shows that we need more, not less, rented housing. With almost ninety per cent 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,” says Smith.
The RLA says it has met with Treasury officials to raise concerns about the impact of the reforms and that it is still calling on the government to pause and provide more time to assess the potential impact the changes may have on the market.
For some weeks landlords and letting agents have been voicing their concerns about Osborne's reforms via a petition named 'Say “No” To George'.
As of yesterday evening, the petition had some 29,881 signatures.
Earlier this week an accountancy firm with over 100 landlord clients reported that it had experienced a surge in enquiries from landlords concerned about the government's proposals.