George Osborne wanted to create a more level playing field in the buy-to-let market. Instead, the former Chancellor of the Exchequer and newly minted newspaper editor has generated consternation amongst private landlords.
Some landlords in the residential sector are now thinking about scaling back their property portfolios, while others are mulling over a change to commercial property — and others are of a mind to throw in the whole landlord thing altogether. What’s got them all so worked up? More tax and potentially fewer profits is the answer.
Mr Osborne’s Section 24 changes to the Finance Act came into effect on April 6 and directly affected the rental incomes of landlords and landlord agents operating in the residential sector (the legislation does not apply to companies renting commercial space, which is why some private landlords are considering the switch). From now until April 2020, the amount that private landlords can claim in tax relief for finance costs such as mortgages and loans will gradually decline, from 75% this year to 50%, 25% and then 0% in the coming years.
Unsurprisingly, this has created widespread alarm among private landlords, but according to one survey, well over a million of them are not aware of how they are now financially impacted by the newly enacted legislation. The poll showed that 1.4 million landlords did not know about the impending tax changes and their implications and that, altogether, some 8.2 million people in England could be affected. (more…)