A raft of ‘anti-landlord’ policies introduced by the government have prompting concern that buy-to-let landlords with low profit margins could end up making a loss as a result of various tax changes, which will push some out of the market altogether.
The introduction of the 3% stamp duty surcharge, the scrapping of the 10% ‘wear and tear’ tax relief, and the fact that mortgage tax relief is currently being phased out, means that landlords simply need a break a tax break, according to Paul Shamplina, founder, Landlord Action.
He explained: “Many of the anti-landlord policies introduced over the last two years are now starting to impact private landlords, leaving many to consider selling up or increasing rents, both of which will be detrimental to tenants. The market needs to increase not decrease the supply of housing and the only way to do that is to offer incentives to landlords.
“Tax breaks for landlords who offer longer-term tenancies would be welcomed. However, landlords will also need greater assurances that if their tenant breaks the terms of their agreement, landlords can evict them more efficiently than the present system allows.”
But Sarah Bush, director, Cheffins is concerned that the Chancellor Philip Hammond may be planning to introduce further caps on second homeownership.
“After having been in the spotlight for many months now, the letting industry could also come under fire,” she said.
Communities Secretary Sajid Javid suggested at the Conservative Party Conference in September that the Chancellor might launch incentives for landlords to offer 12 month tenancies, along with a new housing court, making letting contracts fairer for both parties.
“Whilst these would be helpful in principle, landlords are being weighed down by new taxation and costs and the government needs to consider breaks and incentives to keep private landlords in the marketplace,” Bush added.
But instead of offer landlords a tax break, speculation is growing that the Chancellor will actually take measures to stop buy-to-let investors purchasing property via companies.
One way round the mortgage interest relief loss has been to set up as a company. Mortgage interest can be offset against tax where the borrower is a corporate structure, and the number of landlords incorporating has rocketed.
Although the rules would be difficult to draw up and apply, it is possible that Hammond could extend the loss of tax relief on mortgage interest to incorporated buy-to-let investors. This would naturally have wider consequences for tenants and the housing market.