Landlords in South East suffering most from tax changes

The firm noted that the introduction of the additional 3% rate of stamp duty on second homes means that buying an investment property at the average UK house price of £219,544 will now incur a stamp duty bill of £8,477 rather than the previous £1,891..

Regional house price differences mean landlords in different parts of the country face widely varied tax bills. While landlords in London and the south east have seen a typical stamp duty bill increase by £14,000 and £9,000 respectively, those in the north east and Northern Ireland have seen their stamp duty outlay increase by less than £4,000 on average.

The stamp duty change has been a profitable one for the government, securing an extra £2bn in tax revenues according to analysis of HMRC figures by Blick Rothenberg.

Stamp duty isn’t the only tax with new rules for landlords to get their heads around though. Changes to mortgage interest tax relief restrict relief for finance costs on properties to the basic rate of income tax, though it is being phased in gradually.

And again it is landlords in the south east who are most heavily affected, as the reduction in the tax-free allowance is likely to push their income into the higher tax bracket, resulting in additional annual payments of £1,625, almost double the £898 increase London landlords will see. Again landlords in the north east and Northern Ireland will see much smaller changes, paying an additional £241 and £297 respectively.

Meanwhile, failing to keep up with changes to Houses in Multiple Occupation reforms and Right to Rent laws could see landlords hit with fines worth tens of thousands of pounds.

Research from Foundation Home Loans last month suggested that landlords were ‘battening down the hatches’ by reviewing the size of their portfolio and hiking rents as a result of various market changes.

Christina Dimitrov, business manager at Direct Line for Business said: “Being a landlord in the current climate can be a profitable business, especially if there is a demand for rental properties as we’ve seen in recent years.  However, with so many changes taking place, and with more on the horizon it’s essential for any landlord to be fully up-to-speed with legislation, as the penalties for breaking the law can erode any potential profits.”