Sweeping tax changes for landlords have been demanded by letting agents group Propertymark.

The group has analysed the impact of changes using data from members and other private and public sector organisations. 

The aim is to highlight the detrimental impact government decisions have had on the tax and financial situation for landlords and which is contributing to a serious lack of available rental properties.

Propertymark spells out how landlords are so heavily taxed in a new paper. 

– Under stamp duty land tax rules in England and Northern Ireland a buy-to-let landlord purchasing an additional property for £290,000 (average UK house price) can expect to pay £10,700 in stamp duty, when a main resident would only pay £2,000;

– In Scotland, land and buildings transaction tax on an additional property valued at £185,000 (average house price in Scotland) would be £11,900 for a by-to-let investor with a main resident only paying £800;

– The situation in Wales is even more stark, as a buy-to-let landlord would pay nearly £10,000 in land transaction tax for an additional property, based on an average Welsh house price of £215,000, when a main resident would pay nothing;

– A significant change since 2016 has been the Capital Gains Tax for individuals owning property. In March 2016, rates were cut significantly for top-rate taxpayers from 28 to 20 per cent and from 18 to 10 per cent for lower earners. However, landlords were excluded from the cuts meaning that while the sale of shares in a company that owns the property would incur Capital Gains Tax at 20 per cent, individuals making reasonable gains on the sale of a second property would face the existing 28 per cent.

Other burdens include a reduction in the available tax relief on mortgage interest costs and the removal of the 10 per cent wear and tear allowance for fully furnished properties making these cumulative changes result in a system with limited opportunities for small investors because the ability to offset finance costs against tax liabilities has been eroded.

Furthermore, Propertymark insists there is little incentive to upgrade existing rental properties because repairs and maintenance are tax deductible, but improvements are not.

So the group sets out a series of demands for reform: 

Review taxes that apply to private landlords – Develop policies that promote long-term investment and reduce costs for tenants.

Reinstate mortgage tax relief – Level the playing field between landlords operating in their own name (who are subject to the tax changes) and those who are set up as a business (who are not).

Reduce taxes on additional properties – Existing surcharges must be reduced and could be split so a lower percentage is paid by landlords looking to invest in the private rented sector and a higher percentage is paid by individuals buying second homes.

Bring back tax relief for energy efficiency – Help landlords with the cost of energy efficiency work and ensure that tenants benefit from lower bills.

Reduce CGT thresholds – Align residential property with other asset classes and remove the disincentive to invest.

Avoid rent controls – Flexible tenancies and rent prices driven by market forces have led to the success of the private rented sector across the UK.