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400,000 Landlords to be Forced Up a Tax Bracket from Next Year

More than 400,000 landlords (22%) who pay the basic rate of tax will be forced into a higher tax bracket from April next year as planned changes to landlord taxation come into force.

The changes, once fully phased in over the next five years, will mean that 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.

At present, mortgage interest payments are one of a number of expenses that landlords can deduct as a business cost, including insurance premiums, letting agent fees, and maintenance and property repair costs.

However, while 440,000 basic-rate tax payers will be forced into a higher bracket, all landlords could be at risk of seeing their tax liability rise regardless of their existing rate of tax, with landlords in Central London (31%), the East of England (30%), and the West Midlands (28%) particularly hit. A full regional breakdown can be seen below.

The amount by which landlords will be affected will depend on their personal circumstances, such as whether or not they generate income from any other sources.

Landlords’ tax liability will go up depending on their existing annual mortgage interest payments, which are broken down by portfolio size below.

  • 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

The news comes as the National Landlord Association (NLA) met with Housing and Planning Minister Gavin Barwell to discuss the matter.

The NLA also hopes to meet Financial Secretary to the Treasury, Jane Ellison, in the near future after Chancellor Phillip Hammond responded to the association’s request to discuss the forthcoming changes, and last year’s stamp duty surcharge on addition property purchases.

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BDC 319 : Aug 2024