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UK House prices predicting general election result

Why Change in Tax Relief for Landlords is Going to Impact Everybody

Housing-Market / UK Housing Aug 12, 2015 - 06:29 PM GMT

By: Submissions

Housing-Market Peter Scully writes: In the most recent budget, George Osborne cut tax relief on private rental properties. In the budget, private landlords had their tax relief on mortgage payments cut from the current 45% (or 40% in some cases) to 20%. This is a change which will come into place by April 2020. As you can probably guess, a huge change like this in the industry is going to have an absolutely huge impact on many people.


Recent research shows that when the Bank of England starts to raise the base rate of interest, which will probably happen during the latter of stages of 2016, landlords will start to make a loss on their investments. This could, obviously, have a huge impact on tenants who are living in these properties. After all, if landlords are making a loss, the rental cost is going to need to rise.

Let’s assume that a landlord has a property valued at £100,000. Let’s also assume that they are currently in the higher tax bracket. If they have an 85% loan-to-value mortgage and the interest rate of this mortgage is at 5%, they would end up losing £100 a year. If this rate climbs up to just 5.5%, there will be a loss of £440. If this rises even further, as predicted, to 6%, the loss will total £780.

These changes are, most likely, going to have the biggest impact on those who put their money in property simply because they did not see a return on just having their money sitting around the bank, something which happened quite often during the financial crisis. People who also rely on their rental income to supplement their pension will also be impacted by this change.

The government, however, believes that the changes are a good thing for the country. They believe that only one in five landlords will be impacted. However, it is believed that this is information is inaccurate. It is believed that this consideration does not think about landlords who may own more than one property. It is believed that the policy changes will lead to a decrease in the number of rental homes available on the market.

Now, obviously, if there is a change in tax relief, landlords are going to need to look into other ways in which they can make their money back. Some, for instance, will look into raising rents for their tenants. This is, obviously, not going to be good for tenants as rental rates throughout the United Kingdom tend to be fairly high at the moment already. Those landlords who do not decide to put up their rental costs will end up having less money to spend on the upkeep of their property. There are some people out there who believe that the standard of rental property will fall drastically as a result of this.

Remember, however, these are predictions at the moment. We will have to see what happens between now and April 2020 to really ascertain just how much of an impact these changes will have on the rental market.

Author Bio
Hopwood House are property investment specialists, with a large number of buy to let properties for sale in the UK and overseas.

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