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BTL landlords ‘finally waking up’ to mortgage interest relief change, says NLA

A growing number of private landlords are ‘finally waking up’ to the fact they could be pushed in to a higher tax bracket following the introduction of new taxation rules for buy-to-let, according to the National Landlords Association (NLA).

The NLA calculate that around 440,000 basic-rate tax payers – 22% of approximately two million landlords in this country – will move up a tax bracket as a result of the phasing out of mortgage interest relief, which they have dubbed the ‘Tenant Tax.’

Separate research recently conducted by the NLA reveals that the proportion of landlords with a single property who anticipate that they will be moved up a tax bracket as a result of the changes has almost doubled since the end of 2016.

Some 16% landlords with a single property now say the changes will push them into a higher income tax bracket – an increase of 7% compared with the final quarter of last year.

By the time the changes are fully implemented in 2021, and mortgage interest relief has been withdrawn altogether, the disastrous consequences of Section 24 will mean that it is likely that most landlords currently earning just below the upper limit of the basic income tax threshold of £43,500, will be pushed into the higher bracket of 40%.

Individuals who only let out a single property are by far the most prevalent type of landlord, representing about 62% of the UK’s landlord population – approximately 1.5 of the estimated 2.3 million.

The NLA says that any single property landlords forced up a tax bracket would need to increase the rent by just over 11% in order to continue to make a steady yield from the property, which equates to as much as £116 per calendar month more for the average rental property.

Richard Lambert, chief executive officer at the NLA, said: “Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years.

“A fifth [21%] of landlords with just one property do not make a profit, and over the next few years those bumped up a tax bracket will find that their ability to continue to provide good quality housing will be seriously affected.

“More and more families and young couples are making their home in the private rented sector because they cannot either access social housing or afford to buy their own home. Affected landlords will have the choice of either increasing rents or selling up – so either way it’s the people they currently home who look likely to suffer the most as a result of this damaging tax change.”

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