Landlords Plan to Sell Due to Tax Rises

Some 24 per cent of landlords claim they intend to sell their properties, as a means of coping with increasing taxes, according to a new report by UK bank Paragon.

In addition to selling up their properties to handle the rising cost of tax bills, as many as 20 per cent of landlords intend to pass on the extra costs to their tenants, through higher rent, according to the recent survey data from Paragon.

Landlords have faced a number of regulatory changes in recent years, with rising tax bills being just one of them. For instance, the government has been actively reducing tax relief for landlords, in a bid to create a more equitable tax regime in the private rented sector.

Third of landlords surprised by higher tax bills

As many as 58 per cent of landlords polled saw an average rise of £3,039 in their 2017-18 tax bills, according to Paragon’s estimations. As many as 33 per cent of landlords also said that tax bills in 2017-18 were a little or a lot higher than expected.

For those who reported higher-than-expected tax rises, as many as 49 per cent intended to make changes to their portfolios as a direct result. John Heron, director of mortgages at Paragon commented: “These figures provide early insight into how the tax changes impacted landlords in the first year of implementation The January tax deadline was the first real data point for measuring change and it’s clear that landlords are continuing to adapt their approach as the transition progresses.”

No more tax relief

Amidst rising landlord tax bills, Paragon noted that more changes were afoot. The phasing out of mortgage interest tax relief on buy-to-let landlords has started to have its impact felt already. In the 2017-18 tax year for instance, 75 per cent of mortgage interest costs were eligible for deduction from rent.

However, by the 2020-21 tax year, all financing costs faced by landlords will simply be given as a “basic rate tax reduction”, according to a government press release. The government justified the policy, claiming that “This will ensure that landlords with higher incomes no longer receive the most generous tax treatment.”

Reflecting on the regulatory changes, Heron commented: “The fact that almost one quarter of landlords intend to respond by selling property is bad news. Tax rises for landlords are impacting supply to the sector, driving rental inflation and ultimately making it more difficult for those that rely on the UK’s private rented sector for a home.