RLA research finds that 1-in-4 buy-to-let landlords are putting their properties on the market in response to MIR changes

How are the proposed changes to landlord mortgage tax relief affecting the property market? Well, according to research conducted by the Residential Landlords’ Association, the answer is very badly. According to the RLA the series of changes to mortgage interest tax relief (MIR) which are due to begin in April have resulted in one-in-four landlords putting their properties on the market.

Between 2017 and 2020, the amount of buy-to-let tax relief that property landlords can claim back will decrease over time; reducing progressively from 45 per cent to 20 percent for top rate taxpayers. The latest RLA research contradicts an earlier study by Mortgages for Business which found that the proposed changes had, in general, had a broadly neutral effect on the market.   

The RLA’s research was commissioned to explore and review the developments in the buy-to-let market in 2016. The research which was based on quarterly reviews of 2,883 UK landlords, concluded that George Osborne’s proposed taxation reforms to the landlord sector have had a largely negative impact on any future investment decisions by landlords.

So what did the RLA survey discover? Well, it found that a large proportion of its members – 78 percent – said the changes to the taxation regime have resulted in them opting out of investing in any additional properties. It also discovered that more than two-thirds (67 percent) of landlords believed their businesses would be less profitable as a direct consequence of the MIR changes. What’s more, three-quarters (77 percent) of respondents believed other changes in the sector – namely, the additional stamp duty charge on second homes and the reductions to the wear and tear allowance – would have a negative effect on their rental incomes.

How much of a ‘negative’ effect? Well, the RLA’s statistics indicate that for the ‘average’ UK landlord profitability could decline by as much as a third (34 percent). For some landlords – 36 percent according to the research – the removal of MIR over the next four years will mean they will actually make a loss on their property investment.

So what else did the Residential Landlords’ Association research flag up? Well, it found that 20 percent of its members were seeking to create their own limited companies in order to address the reforms of the buy-to-let sector. Property landlords who operate their rental incomes via a limited company are not affected by the buy-to-let taxation tapering changes that will run from 2017 to 2020.

If you are concerned about your tax liabilities as a property landlord or owner of a second home, then speak to the accountants at Steven Glicher. We work closely with landlords and offer expert advice on how the new changes may impact on your tax position, and therefore your cashflow. We can also review your affairs and help you structure them in the most tax-efficient way that suits your needs. For further information, call Steven Glicher accountants on 0161 4858007 or email info@stevenglicher.co.uk.

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