4th
Jun 2017
A landlord group has just released its latest report on the state of the private rented sector and claims that many landlords are now realising that they could be facing the prospect of being forced into a higher tax bracket, because of the new taxation legislation.
The report states that the numbers of landlords who own one property that is rented out are now realising that will be pushed into the higher tax bracket, has nearly doubled since the end of last year.
16% of single property landlords that took part in the research, said they expect to be hit by having to pay higher tax, which is almost double when compared with the quarter of 2016, when it was just 7%.
The levels of the tax changes will be staggered over the next four years and by 2021 landlords’ mortgage finance costs will count towards their taxable profit. At present the single property landlords' average annual mortgage finance costs around £5,600.
Any landlords that are earning just under the upper limit of the basic income tax threshold of £43,500 are at significant danger of being pushed into the higher 40% bracket.
In the private rented sector the majority of UK landlords - 62% - rent out one property and make up 1.5 million of the estimated landlord population of 2.3 million.
The report suggests that nearly 368,000 rented 'homes' housing families and young couples that the tenants may have to pay higher rents or face the real risk of the landlord selling up.
The landlords' group forecasts that those landlords forced into paying the higher rate of tax, will have no other option than to increase the rents higher than 11% to ensure that they are still able to achieve a steady yield from their property. The approximate monthly increase for the average rented 'home' could be as much as £116.
The Chief Executive Officer of the group, said: “Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years.
"21% of landlords with just one property do not make a profit, and over the next few years those bumped up a tax bracket will find that their ability to continue to provide good quality housing will be seriously affected.
"More and more families and young couples are making their home in the private rented sector because they cannot either access social housing or afford to buy their own home. Affected landlords will have the choice of either increasing rents or selling up – so either way it’s the people they currently home who look likely to suffer the most as a result of this damaging tax change.”
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