Tax changes may force investors to sell properties or increase rents

March 12, 2016 by Brendan

Landlords

Landlords are facing the prospect of having to sell their rental properties or raise rents, as the new tax changes come into force.

Increased stamp duty rates for owners of second properties and landlords, combined with the gradual abolishing of mortgage interest tax relief, will all result in many landlords losing money. If interest rates increase, even at a moderate rate, many investors believe they will make losses on their rental properties. Recent research indicates that the average profit for a landlord is £3,400 per annum. If interest rates increase before 2020, landlords could make a loss of over £300.

One investor who has five properties across Kent, has said that he may have to consider selling properties or increase the rent so that he doesn’t make a loss. Although Jaye Cook has amassed the properties over the last 15 years to prepare for his retirement, he says that the changes had “come out of the blue” and he was concerned that further tax changes could be introduced which would affect landlords. He said:

“These changes will force landlords to raise their rents to make ends meet, or they’ll sell up and create a glut of buy-to-let properties.”

Currently, landlords claim tax relief on their mortgage interest, but from April 2017 the tax relief will be reduced and by 2020 it will no longer apply. For some investors it may be possible to gain advice from a CeMAP qualified mortgage adviser, as selling properties may not be the best solution.