You are here: Home - News -

440,000 landlords to be forced into higher tax bracket

by:
  • 18/10/2016
  • 0
More than 400,000 landlords will be pushed into a higher tax bracket for the first time from April next year, when tougher buy-to-let tax rules come in to force.

According to the National Landlord Association (NLA), 440,000 basic-rate taxpayers – or 22% of the UK’s 2 million landlords – will be forced to pay 40% tax on their income rather than 20% when the rules are implemented.

The changes, once fully phased in by 2021, mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.

Currently, mortgage interest payments are one of a number of expenses landlords can deduct as a business cost, including insurance premiums, letting agent fees, and maintenance and property repair costs.

The NLA said the amount by which landlords will be affected depends on their personal circumstances, including whether or not they generate income from other sources.

Landlords in London, the east of England and the West Midlands are expected to be hit hardest. Those without a mortgage will not be affected.

Last week, a group of private landlords – led by Cherie Blair QC – lost a High Court battle to overturn the so-called Tenant Tax.

Richard Lambert, chief executive officer at the NLA, said: “When the government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers.  We now know that is complete tosh.

“The government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.

“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home”.

This is just one of a range of tougher tax measures aimed at landlords. In April 2016, a new 3% Stamp Duty surcharge was introduced for anyone buying a second property.

There are 3 Comment(s)

You may also be interested in

Bridging

Keep up-to-date with all the breaking bridging and short-term lending news and analysis, from regulatory changes to product innovation and inside market knowledge. Take a look at our broker and lender case studies showing short-term finance in practice.

Commercial

Find all the news, opinion and analysis for property finance brokers specialising in commercial and semi-commercial mortgages, alternative and development finance for commercial investments in residential projects.

Second charge

Stay up-to-date with the latest news, analysis and opinion on the secured loan market as it evolves into a mainstream finance option following European regulation on 21 March 2016.

Complex buy-to-let

Whether it’s a complicated asset or a complex customer, you’ll find out all the breaking buy-to-let news in this section. From limited companies to portfolio landlords, student lets to a House in Multiple Occupation, we’ve got all bases covered with our up-to-the-minute news, analysis and opinion.

Mortgage Solutions

Find all the breaking news, analysis and industry comment on Specialist Lending Solutions' sister site, Mortgage Solutions