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Will ever increasing restrictions on tax relief for landlords result in single property landlords increasing rents?

According to the National Landlord’s Association (NLA), the proportion of single property landlords who expect be pushed into a higher tax bracket, following the recent restrictions placed on finance costs, has doubled since 2016.

Commencing this April, the restriction of tax relief on finance costs will be phased in over the next four years. Once the tax provisions are fully implemented in 2021, finance costs will no longer be taken into consideration when calculating taxable profits. Instead, a basic rate tax reducer equal to 20% of the finance costs will be permitted.

The average mortgage finance cost for a single property is currently £5,600 per year, meaning those earning just below the higher rate tax threshold could easily be pushed into the 40% bracket.

The NLA has stated that any single property landlords pushed up a tax bracket would need to increase their rent by more than 11% in order to maintain a steady yield from the property.  Given that a fifth of single property landlords are already unable to make a profit, these changes may result in many landlords having to sell up.

Please do get in touch with our expert team of charted tax consultants if this is something that affects you or if you are considering disposing of your buy-to-let property and are in need of capital gains tax advice.










For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.

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