Buy-to-let changes are beginning to bite

One-in-four specialist landlords is set to sell up due to the recent buy-to-let changes, according to new research from the Residential Landlords’ Association (RLA).

This is the first sign of how drastically these buy-to-let changes might affect the market, although many landlords have already taken steps to incorporate their property portfolios or purchase new properties in advance of the imminent stamp duty hike.

A second report from Kent Reliance, released in June, found that 40% of buy-to-let landlords intended to increase tenants’ rent by an average of 5.6%.

David Smith, policy director at the RLA, commented: “The RLA’s findings are a worrying sign of the potential trouble ahead for tenants as a result of the previous Chancellor’s tax rises.”

Elsewhere, the Council for Mortgage Lenders has analysed data from September 2015. They found that the amount borrowed by buy-to-let investors (£2.8bn) was 22% lower than during the same period in the previous year. This represents a 7% month-on-month decrease.

The changes are set to hit landlords in higher tax bands (paying 40 – 50%), and those who have large mortgages, hardest. It’s also predicted that the changes will push an additional 440,000 landlords into a higher tax bracket.

In August 2015, then chancellor George Osborne announced that buy-to-let landlords would no longer be able to deduct mortgage interest costs from rental income. In the subsequent Autumn Statement, Osborne unveiled plans to raise stamp duty on second property purchases by 3%.

Call on 3 Wise Bears for more of the latest accountancy advice for buy-to-let landlords.