Buy-to-let landlords believe that today’s Spring Statement provides the chancellor Philip Hammond with an opportunity to bolster activity in the buy-to-let market, which has continued to slow primarily due to the previous chancellor’s tax changes.
A number of tax and regulatory changes have hit landlords’ profits over the past couple of years, including the scrapping of the ‘wear and tear’ allowance, the introduction of the 3% stamp duty surcharge, and mortgage tax relief cuts which simply do not add up for buy-to-let investors.
Landlords used to be able to deduct mortgage interest and other finance-related costs from their rental income before calculating their tax liability.
However, this interest relief is being slashed from 100% to 0%, with the change being gradually phased in between April 2017 and April 2020, and as a consequence the PRS is in need of a major boost.
Mortgage interest tax relief has unsurprisingly been identified as the top issue for buy-to-let landlords, with the disastrous consequences of Section 24 leaving many higher-rate taxpaying landlords with little alternative but to pass higher costs on to tenants.
Many buy-to-let landlords would also like to see the stamp duty surcharge on the purchase of additional homes, including buy-to-let properties, scrapped in the Spring Statement.
Lisa Simon, head of residential at Carter Jonas, said: “With stock levels at their lowest for a generation and rental increases outpacing earnings, the government has almost singlehandedly destroyed the traditional lettings market.
“The introduction of stamp duty penalties applicable to the purchase of secondary residences or buy-to-let properties, exacerbated by the erosion of tax relief for small scale landlords, has forced many to sell up and vacate the market.
“We need to see urgent revisions to the stamp duty levies applied to buy-to-let properties – particularly for the small scale landlords who have kept the lettings sector going for decades, but who can no longer afford to remain in the sector.
“We would like to see the chancellor breathe life back into the private landlord sector, alleviating some of the operating costs that are, at present, driving landlords away and limiting the quality homes available for people to live in.”
Simon slammed Hammond for what she described as his “short-sighted, ‘one size fits all’ lettings legislation, designed to penalise small-scale landlords”, which has proved “devastating to the industry”.
While Build to Rent will increase stock levels of lettings properties, the model often fails to build homes where people want to live, according to Simon.
She added: “If the chancellor will only champion Build to Rent going forward, he must motivate the planning system to allow homes to be built in the right locations.
“Reforms in this area are compulsory if the chancellor is committed to shoring up the future of the lettings market – and provide a sufficient volume of homes for Britain’s future population.”