Landlord Tax – Half of Landlords to Quit by 2020

Recent research from insurer AXA, mentioned in Landlord Today suggests that almost half of all landlords plan to quit the rental market as they face the controversial phasing out of landlord mortgage tax relief by 2020.

A hot topic for those with rental property, and one we have discussed on the blog before, the upcoming changes may result in profit losses for many landlords, particularly higher earners who fall into the top level tax bracket and have enjoyed up to 45% tax relief up until now. The new research carried out by AXA has found that more than 40% of landlords believe they will be worse off as a result of the changes to tax relief.

The changes come in from this 2017/18 tax year, when tax relief will be split so that landlords can claim 75% of allowable expenses, and will receive relief at the basic-rate (20%) on the remaining 25%. This will change to a 50/50 split between in 2018/2019 and then 25% (allowable expenses) 75% (expenses at 20%) in 2019/2020. In 2020/21, the switch will be complete, with tax relief applied at the basic-rate of 20% only.

The research found that two thirds of landlords feel unduly stigmatised for running rental businesses, with this new legislation the latest in a run of legal changes that have directly impacted landlords and the rental sector in recent years.

As we have previously advised on the blog and as this research suggests, landlords should be looking to reorganise their portfolios and transfer assets where possible in preparation of the upcoming changes. One in five (21%) landlords surveyed reported that they plan to sell all their rental properties, 10% will reduce their rental portfolio and 7% plan to switch to commercial property ownership, which is perceived by some property investors as a more secure option. 8% of landlords asked say they will transfer ownership of their rental property to their partner or a family member in a lower tax bracket as a way of exploiting their personal tax allowance, which is simultaneously due to increase to £12,500 by 2020.

As many as two thirds of landlords may be in the position of having just one or two rental properties, not operating in the rental sector as professional property tycoons with larger portfolios, and it may be difficult to forecast just how these changes will impact directly.

As this is a complex issue, the team at Caledonia Bureau are more than happy to sit down to discuss your current position and how we can help you manage any changes ahead, helping to make sure your investment stays profitable. Get it in touch with us today or pop in for a chat at one of our local branches to see how we can help.

As one of the West of Scotland’s longest-standing estate agents, we have had lots of experience managing the ups and downs of the housing market in recent times, so you can be confident you’ll be in safe hands when working with us. With an expert team by your side and a variety of properties on offer, including both property to let and homes for sale, Caledonia Bureau are confident that we can match you with the right home. Give our friendly team a call today, choosing from our offices in Clydebank, Helensburgh, Dumbarton and Paisley. 

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