Buy to let landlords need to take a more professional approach to running their property as many are unaware of scathing new tax changes impacting their businesses.
A new study reveals that many of Britain’s estimated 2 million landlords have no plans to make changes despite new tax rules.
These include the start of phasing out mortgage interest relief for high earners, scrapping the 10% wear and tear allowance for furnished buy to lets in favour of new rules and hiking stamp duty for the purchase of new letting properties.
The research, by deposit protection firm mydeposits found:
- 26% of landlords do not know about the changes to claiming mortgage interest relief
- 23% were unaware of the increase in stamp duty levied on buying new rental properties
The survey found most landlords owned one or two rental homes and look on buy to let as a part-time income supplement rather than a full-time business, and as a result, failed to keep up with changes in the law affecting them.
While 86% of landlords own four or fewer properties, 8% let out between five and 10 homes.
A fifth said the tax changes would not impact their businesses, but 21% admitted they were thinking about raising rents to pass tax increases on to tenants. Another 10% plan to leave the market and 9% intend to take on managing their properties directly instead of employing a letting agent to cut costs.
Eddie Hooker, CEO of Hamilton Fraser, parent company to mydeposits, said:
“Around 25% of those who responded were unaware of the changes to the tax regime on their existing portfolios which shows that more is needed to be done to help educate the market and help prepare landlords for the changes to their personal tax liabilities over the next few years.
“Even more poignant is the suggestion that more than 50% of landlords are considering changing their behaviour to safeguard their income by either increasing rents, turning to self-management or even selling up. “