Investor landlords believe that the Spring Statement, released earlier this month, provides an opportunity for the Chancellor, Philip Hammond, to bolster activity within the buy to let sector, which has remained slow, due primarily to the last Chancellor’s tax changes.
Regulatory and tax changes have hit the profits of landlords considerably during the last few years. Cuts to mortgage tax relief, the introduction of a 3 per cent stamp duty surcharge, and the abandonment of the allowance for wear and tear have all impacted buy to let investors.
In the past, landlords could deduct finance-related costs such as mortgage interest from the income acquired from their rental properties before working out their tax liability. However, this interest relief is to be cut from 100 per cent to 0, with the changes being phased in gradually over three years from April 2017. Industry experts claim that as a consequence, a major boost is required for the private rented sector.
Tax relief for mortgage interest has been identified as the most important issue for investor landlords, with the negative consequences of Section 24 resulting in higher-rate taxpaying landlords having no alternative but to inflict higher costs onto tenants.
Many investor landlords would also approve of the scrapping of the stamp duty surcharge for purchasing additional properties, which includes buy to let homes, within the Spring Statement.
Carter Jonas’ head of residential, Lisa Simon, stated that as stock levels are at the lowest for a generation, with rental increases also outpacing earnings, the government is inflicting more damage to the traditional lettings market. She further explained that the introduction of stamp duty surcharges, applicable to purchases of buy to let or secondary properties, further exacerbated by the removal of tax relief for smaller scale landlords, has lead to many selling up and vacating the market.
Urgent revisions are required for the stamp duty levies which are applied to buy to let properties. Industry experts would like the Chancellor to breathe new life back into the sector, and alleviate some of the operating costs which are currently driving away landlords from the sector and limiting the amount of quality homes which are available to private tenants.
Despite the increase of property stock levels due to Build to Rent, the model frequently fails to provide homes where people most desire to live, according to Ms Simon. She added that the Chancellor must motivate planning systems to allow properties to be built within the right areas in order to provide the sufficient volume of properties needed for the UK’s future population.
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