Tax bombshell awaiting six out of ten private landlords

The scale of the tax upheaval facing private landlords has become clear, with six in ten saying they face being pushed from paying the basic to higher rates of income tax as a result of the new regime.

Top lawyer David Smith described it as a bombshell, warning that landlords could quit the sector en masse.

In his Summer Budget, the Chancellor announced that from 2020, mortgage interest relief for residential landlords will be restricted to the basic rate of income tax.

However, this will be applied to turnover, not profit.

The Residential Landlords Association says this means that many more landlords will find themselves pushed into the higher rates of income tax, despite their income not having increased.

In a survey of almost 1,200 landlords, of those currently paying the basic rate of income tax, over 60% said that the changes would push them into either the higher or additional rate of tax.

The RLA has met with officials at the Treasury to raise concerns about the impact the mortgage interest reforms will have on the ability of landlords to invest in much-needed new housing.

RLA policy director and EYE legal contributor David Smith said: “The findings of our survey are deeply concerning. Many landlords currently paying the basic rate of income tax face the prospect of a nasty surprise when they meet with their accountants.

“Having felt that they were not affected by the Budget measures, many will seriously consider whether it is worth continuing in the market when faced with this tax bombshell.

“It cannot be right that many landlords face seeing their income tax increase without an increase in their income.

“All the evidence shows that we need more, not less, rented housing. With almost 90% of landlords being individuals renting out just a handful of properties each, it is only by supporting this group that we will boost the supply of homes to rent.

“The Budget announcements risk undermining the potential for growth.

“Even at this late stage we are calling on the Government to pause and provide more time to assess the impact on market.”

See also our other story on the size of the buy-to-let market and lenders’ concerns over the tax changes ahead.


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  1. Robert May

    Will corporation tax also be increased too or is Mr Osborne openly favouring his chums in the city and abroad  who are buying up the  housings stock from under the feet of first time buyers?

    It is fairly obvious the banking and investment industry is on its knees in term of trust, reliability and yields, in that light it becomes obvious Mr Osborne is attempting to  tax self invested pension provision out of the market to force pensions investment back to his cronies  and force a release of property which has been put together by private  and family investors.


  2. greg

    Taxing turnover and not profit is just fundamentally wrong and sets a dangerous precedent.

  3. Peter

    And on that bombshell, goodnight.

  4. nosharkbait

    The Chancellor cannot raise interest rate as at the level of goverment borrowing it will cripple UK, so by doing this, claw back “bank money” ?

    Clever ploy, but surely this should apply to all businesses not just landlords? With raising interest rates, landlords could justify rent increase.

    time to sell at a loss and give  Mr Osbourne  a double wamy back – no tax and no accomodation?

  5. followme

    I don’t think people have truly understood the proposal, partially as most in the industry seem oblivious.

    There will be a mass exodus of investors, partly replaced by the retiree investor looking for replacement to the standard annuity, but its either one hell of a gamble by the government to correct the property market or an ill thought out money grabbing exercise.

    As a Landlord with just 6 houses, I will be worse of by around £12,000 per annum, yielding an average return of a round 1.5% per property! That’s not taking in to consideration any potential licensing scheme to be adopted by my local council, additional expenditure determined by new legislation every other month… oh and I forgot no agency fees!

    Landlords and agents need to sign the petition, if they don’t expect massive changes in the market, in both sales and lettings!

    1. Robert May

      But the alternative is already effectively taxed at 50% but is is not 50% going to HMRC it is 50%  gong to the banks in the form of charges. A 2% return on a pension investment with  1% charges is net 1%.  It is because  yields are so low on banked investment and the public are controlling their own investment portfolios that Mr Osborne is making it as unattractive as he can.

  6. Vanessa Warwick

    Please see my “Landlords’ Barometer” on this very topic!  This issue affects EVERYONE in our sector, not just landlords!  It will affect tenants, builders, suppliers, and … lettings agents.

    Do not be complacent on this issue.  Stand up and fight!

    I am staggered at the lack of awareness about the effect this will have on the private rented sector.  Get educated, get involved!

    1. Trevor Mealham

      Well said Venessa

  7. Woodentop

    A very naïve way to reduce rent increases?


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