Buy-to-let exodus spurred by increasing tax burden, analysis reveals

The UK residential market has lost 116,000 buy-to-let properties in the last year, with the number of rental homes dropping from 4,579,000 to 4,463,000.

In addition, 70,000 BTL landlords have exited the market in the last year, with the number dropping from 2.82 million in 2020 to 2.75 million in 2021.

The figures come from analysis of HMRC data by chartered accountant UHY Hacker Young, which believes the large number of BTL landlords exiting the market is partly due to the “substantial” increases in tax levied on the sector.

Landlords could previously deduct finance costs, like mortgage interest, from their earnings to reduce their income tax. However, this rule changed in 2017, with the amount landlords could deduct from their rental income gradually decreasing until it reached 0% in 2020. With all rental income now having to be declared, landlords can find themselves pushed into a higher tax bracket, and those with small profit margins might even end up losing money after paying tax, warned UHY Hacker Young.

The government also reduced the ‘wear and tear’ expenses landlords can deduct from their rental income; whereas landlords could previously claim a deduction worth 10% of their rental income each year, from 2016 they have only been able to claim for the actual cost of replacing furnishings.

Landlords also saw a cut to private residence relief in 2020, which increased the amount of capital gains tax they must pay when selling a rental property that used to be their main home. BTL purchases also incur a 3% stamp duty surcharge – another contributor to the decrease in rental properties by reducing the number of new landlords entering the market, according to UHY Hacker Young.

“We have seen an increasing number of landlords selling off or reducing their portfolios over the past year,” a spokesperson for the accountancy said. “Less favourable tax treatment has encouraged this exit from the sector, as well as dissuading newcomers from entering the market.

“Reducing the number of properties for rent by driving landlords out of the market doesn’t benefit tenants as it adds to the upward momentum on rents. The decrease in available properties has led to increased competition amongst renters.”

However, the spokesperson added that landlords who have managed to stay in the market have benefited from rising rents as a result of this excess of demand over supply.



Email the story to a friend


  1. MrManyUnits

    I believe apart from taxed on turnover-the only business that is, this is the start of more Landlord bashing-EPC (on hold atm) Sec 21 possible rent controls and the perfect storm of the Government making is also the perfect time to walk towards the sunset !

  2. Will2

    Perhaps the Government need the Three Christmas Ghosts to show them the direction in which they are travelling?  I understand the tenant viewpoint but they were better off when supplies were plentiful. If they didn’t like or get on with their landlords they had the choice to find somewhere else at a competative rent (being lower rents when demand was lower/supply was greater). They now have less choice (*as landlords driven out of the market) and are having to stay with landlords as finding alternative property is much more difficult if not impossible.  Wait ’til S21 has gone, it will get a whole lot worse for tenants.  Major Government intervention in markets rarely works, particulalry when they so power crazed.  It is not just the current loser government but virtually all politicians and so called housing charities/pressure groups who fail to understand the housing markets and in general terms  love the public popularity of landlord bashing.  So there we go Bash & Trash the housing market. It is encouraging to see Crisis is now working with landlords.

    1. Woodentop

      Absolutely correct Will2 and what they seem too dumb to realise, you never ever do anything that reduces supply. No supply means it doesn’t matter what you are doing for the consumer, if there are no goods for them to use.


You must be logged in to report this comment!

Comments are closed.

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.