Tax attacks on landlords spark restructuring and rent rises
Wednesday 21 December 2016
Recent moves intended to promote home ownership by hitting the BTL industry have backfired as landlords protect their businesses, new figures show.
Increasing numbers of landlords are restructuring their portfolios to beat higher taxes on rental income that will be phased in from April 2017, a survey of 900 landlords by Kent Reliance reveals.
The new rules, which prevent landlords from deducting mortgage interest costs from their rental income against their tax bill, were unsuccessfully opposed in court in October.
OneSavings Bank chief executive Andy Golding said: “The use of limited companies is soaring, and rents are increasing, even after one of the biggest surges in rental supply in recent history.”
The survey revealed over 100,000 limited company loans were issued in the first nine months of the year - more than double 2015’s total – with 20,500 taken out in March, before the higher rate of stamp duty on second homes was enforced.
And the report predicts demand will soar as 25 per cent of landlords say they are considering moves to avoid the new tax changes.
The report also forecasts rents will increase by an average of 3 per cent in 2017.
David Hollingworth of mortgage broker London and Country said there were advantages to using a limited company to buy rental properties, but warned such a move could trigger ‘other costs’ and said the structure would be unlikely to benefit those with just one or two rented homes.
The Residential Landlords Association (RLA) said its research found 40 per cent of landlords had thought about switching to limited company status but 80 per cent decided it was unsuitable.
RLA chief executive Andy Goodacre said landlords should be encouraged to develop new properties and believed the mortgage interest changes should only apply to new borrowing.
He added that the stamp duty surcharge should not be applied ‘where a landlord invests in property that adds to the net supply of housing.’
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