How Landlords Are Responding to the Latest Tax Changes

The financial crisis brought into being the “accidental landlord” – purchasers who bought with no intention of letting their property but were forced to do so because they could not sell due to the state of the market and needed to move. Some decided to buy a new house and retain the existing property as an investment.

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Tax Changes

However, tax changes have altered this dynamic – extra stamp duty on a new home and losing full (in April 2020) mortgage interest relief against rental income together with a change in the Capital Gains Tax regime (again April 2020) on principal private residence and letting reliefs will all impact on the sector.

It was widely thought that the buy-to-let market would shrink as a result of these tax changes, but it has been reported that landlords have stuck with it, becoming creative by diversifying their portfolios or converting themselves to limited companies and thus subjecting themselves to the lesser rate of Corporation Tax.

Effect on the Market

There is, however, little evidence to suggest any significant surge of landlords selling up. Portfolios are still growing, though smaller landlords now do it differently – remortgaging existing properties to secure decent longer-term fixed rates and to raise capital. There has also been a shift to high-yielding houses of multiple occupancy in previously unheralded parts of the country. The focus has therefore become more professional, and even accidental landlords are required to do more diligence. For example, the use of a property inventory app and software such as that from will allow for efficient managed property check-ins, checkouts, inspections and risk assessments – all necessary efficiencies now bottom-line profitability is harder to maintain.

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It was reported in November 2019 that one third of landlords wished to sell, leading to fears that renters might struggle to find suitable accommodation. So far this has proved unfounded, as in practice a landlord selling a property due to higher taxation would be selling to either a first-time buyer moving out of renting or to another landlord, leaving overall supply and demand for rental properties and therefore the cash level of the rent unchanged.

The residential letting market therefore remains competitive, meaning landlords have no power to pass on additional cost to tenants – so some good news at least for them.