With the long-awaited changes to mortgage interest rate relief coming into force last week, propertyreporter.co.uk has revealed that almost 20% of landlords questioned are unaware, or only vaguely aware, of the increase in tax that they will now have to pay on their rental properties.

Almost half of landlords questioned (47%) don’t know how much more tax they will be paying by 2020, when the new system comes into full force.

The changes mean that landlords must now pay tax on turnover, rather than the difference between rental income and mortgage interest. Currently tax is due on profits at a landlord’s highest rate of income tax, but between April 2017 and 2020 this system will be replaced and all landlords will pay tax on the full amount less tax relief fixed at 20%.

With the majority (60%) of landlords questioned owning less than four buy-to-let properties and most of these with a mortgage, it seems that landlords who pay 40% or 45% tax will be hardest hit, but so will some basic-rate taxpayers, because the change will push many into the higher-rate tax bracket. However, very wealthy landlords who do not need mortgages are unaffected.

The research also revealed that 20% of landlords have said that they are most likely to increase rents to help mitigate the cost of their new tax bill, meaning tenants could face a permanent increase in rent as a direct result of the changes.

Only 5% of landlords have plans to sell their buy-to-lets, despite the barrage of charges inflicted on landlords over the last year.

Landlords have been hit hard in the last year with the 3% stamp duty surcharge and the ban on tenant fees in 2016.

Via: http://www.propertyreporter.co.uk/landlords/1-in-5-landlords-still-confused-over-btl-tax-relief-changes.html

Leave a Reply

Your email address will not be published. Required fields are marked *