(qlmbusinessnews.com via uk.finance.yahoo.com – – Tue, 18 Oct, 2016) London, Uk – –
Thousands of tenants could face substantial rent rises next spring or even be forced to move out as sweeping tax changes hitting their landlords come into effect.
About 440,000 landlords are facing substantially higher tax bills which could see them passing on the costs to their tenants or selling up, a pressure group has warned.
The changes will mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
The National Landlord Association says more than 400,000 landlords who currently pay basic-rate tax will immediately be hit by the changes although, potentially, the majority of Britain’s estimated 2m landlords could find their tax liability rise.
It says about a third of landlords in London and the east of England will be affected next April, with just over a quarter in the West Midlands.
Richard Lambert, chief executive officer of the NLA, said its research showed government claims the changes would only affect a small number of higher-rate taxpayers were “complete tosh”.
“The government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home,” he added.
Warning shot: landlords face being squeezed by the taxman come next spring
The amount by which landlords will be affected will depend on their personal circumstances, including whether or not they generate income from any other sources.
Landlords’ tax liability will increase depending on their existing annual mortgage interest payments, which are broken down by portfolio size:
Single property – £3,600
2-3 properties – £8,600
4-5 properties- £16,300
5-10 properties – £18,200
11-19 properties – £24,900
20+ properties – £38,000
It has been estimated that some 7.2 million UK households will be in rented accommodation within a decade as house price inflation continues to see increasing numbers struggle to get on the property ladder.
By Mark Dorman