Tax on landlords really a tax on tenants

It’s no secret that there have been many changes in the last couple of years regarding what landlords are expected to pay in the form of tax, and how they are expected to operate.

In the last 24 months or so there has been much discussion within the buy to let sector regarding just how much tax landlords should cough up– and there has also been no secret made of the desire of many landlords to quit the buy to let market because the taxation changes have been heavily weighted against them.

The tax changes that we’re referring to have been complex to say the least, yet, to put it as simply as possible, it is believed that some of the most successful landlords will soon pay around 67 per cent tax on properties. Anyone can appreciate that that seems quite steep.

The main difference to the tax scenario compared to a couple of years ago is that landlords don’t receive tax relief on interest that they pay on the mortgage. A twenty per cent tax credit is also now a feature. 

Whilst we are acutely aware that government tax changes to the buy to let market have been met with utter disdain by landlords, we cannot stress enough the impact that this is having on tenants too.

First and foremost, it is obvious to note that since these tax hikes and changes have come into play, tenants are being charged more for their rents. It’s only natural that this would occur.

Tenants are the real losers in all this. Landlords cannot stand such a hit without passing on some of the cost to tenants – and this is exactly what is occurring in the way of rent increases.

Another scenario that is occurring because of these tax changes is that landlords aren’t making as much money as they used to, and the entire situation of being a landlord is becoming so stressful, that they are deciding to quit the market. This has meant that the rental market is getting smaller, just as demand grows ever more desperate. More landlords than ever before put some of their houses up for sale last year as a direct result of changes to their tax situations. This has had a significant impact on people looking to rent properties this year. Thousands of homes that were available to rent around five years ago have now been sold off - thus meaning there is a shortage of available homes for renters.

The tax changes have undoubtedly impacted landlords up and down the country, but, as always, it is the people at the bottom of the food chain that ultimately suffer. In this instance, it is the renters.