More than a third of landlords have considered selling rental properties due to the loss of the Buy to Let mortgage interest tax relief while one in four have raised rents, according to new research1 from The Landlord Works.
Landlords could previously deduct mortgage expenses from their rental income in order to help reduce their tax bill. However, this started to be phased out in 2017 before being stopped in April 2020. Now landlords receive a tax-credit, based on 20 per cent of their mortgage interest payments, which is less generous for higher-rate taxpayers, who previously received 40 per cent tax-relief on mortgage payments.
The research reveals that 37 per cent of landlords have considered selling rental properties as a result of the changes. Nearly eight in ten landlords (77%) feel the changes unfairly punish them, with the same percentage (77%) saying there should be more support for landlords especially post-pandemic - leading to many considering selling their properties. More than a quarter (26%) of landlords with larger portfolios (20+ properties) have reduced their portfolios to reduce the tax impact, compared to 13 per cent of those with between 2-5 properties.
The changes may also be forcing up costs for tenants, with one in four landlords (25%) having raised rents to cover the increased tax burden. However, this figure jumps to 58 per cent for landlords with 20 or more properties on their books.
As a result of the changes, half (50%) of landlords are struggling to keep up with the pace of regulation, while more than a third (38%) find the new tax rules difficult and overly complex to understand.
With the 31st January online self-assessment tax-deadline looming, many will be looking for support to ensure they have understood the latest rules correctly. Despite struggling with the tax changes, more than three fifths (62%) will look to complete their tax return themselves rather than outsourcing to an accountant.
In order to support landlords, Nationwide Building Society has recently launched The Landlord Works – a free-to-use platform that helps landlords manage their properties in one place and navigates them through the complex rules and regulations in the sector. Landlords looking for support with completing their tax return can also benefit from a 30 per cent discount2 with GoSimpleTax – a digital resource which allows landlords to track rental property income and expenses while also alerting them to opportunities to save money on their tax bill and submit their tax return directly to HMRC.
Paul Wootton, Director, said: “In recent years there have been numerous changes for landlords to get their heads around. Now with the loss of the mortgage interest tax-relief many are questioning whether to leave the sector all together by selling some or even all of their properties in order to help reduce their tax burden. Rental increases are also a reality, with one in four landlords having recouping losses from tenants, many of whom will be struggling with the rising cost of living.
“Helping landlords navigate any confusion in the sector is one of the major reasons we launched The Landlord Works as a free-to-use service where they can get the advice and support, they need to manage their portfolios as best they can”.