More than a third of landlords have considered selling rental properties due to the loss of buy-to-let mortgage interest tax relief, Nationwide’s new The Landlord Works has reported.
Landlords’ mortgage interest relief 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 Landlord Works research found that 37 per cent of landlord respondents had considered selling rental properties as a result of the change. Nearly eight in ten landlords (77 per cent) thought the changes had unfairly punished them, with the same percentage saying there should be more support for landlords especially post-pandemic.
More than a quarter (26 per cent) of landlords with larger portfolios (20+ properties) had reduced their rental holdings while 13 per cent of those with between two to five properties had done the same.
The changes may also be forcing up costs for tenants, said The Landlord Works. One in four landlords (25 per cent) had raised rents to cover the increased tax burden. Landlords with larger portfolios were more likely to have done this, 58 per cent saying they had upped rents.
Changes to tax and other rules have left 50 per cent of landlords struggling to keep up with the pace of regulation. More than a third (38 per cent) said they found new tax rules difficult and overly complex to understand.
Despite this, 62 per cent of landlords said they completed their own tax returns rather than outsource the task to an accountant.
‘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’, said The Landlord Works director Paul Wootton.
‘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’.
