One in five UK landlords will reduce property portfolios in 2018

One in five UK landlords will reduce property portfolios in 2018

As many as 20% of UK landlords have said they are planning to reduce the volume of properties they own in 2018, as the NLA warns tax and regulatory changes could damage the market.

The number of landlords who intend to sell property this year is at a 10-year high at 20%, according to research from the National Landlords Association (NLA). Although this still means the vast majority of buy-to-let investors are planning on maintaining or growing their portfolios, the increase could indicate a slight slowdown in the sector.

Recently, the government has imposed a number of measures targeting buy-to-let landlords, including the 3% stamp duty surcharge for second homes, the Section 24 change that limits mortgage interest relief on income tax, as well as plans for tougher action against rogue landlords and additional licensing requirements.

Richard Lambert, chief executive of the NLA, said: “The Government needs to look at the impact these policies will have on the PRS [private rented sector]. More and more people are relying on this sector for a home, so it is vital that landlords not only provide a high standard of accommodation, but are incentivised to do so by the prospects of a reasonable return on investment.”

Bypass the tax

With the majority of landlords still planning on continuing to maintain their existing portfolios, and others choosing to diversify and increase their portfolios in up and coming buy-to-let locations across the UK, such as in the north, the sector is proving resilient to the latest difficulties.

Landlords seeking to find ways around issues such as extra tax can run their portfolios through a limited company structure, and research from banking provider Kent Reliance has revealed that around 70% of new buy-to-let mortgage applications are now from limited companies as opposed to individuals. This enables landlords to continue to claim tax relief on mortgage interest, bypassing the Section 24 regulation.

John Eastgate, sales and marketing director at lender One Savings Bank, believes that this trend will rise as the tax relief is gradually phased out and more non-professional landlords begin to realise the full implications of the change.

He said: “The first moment of truth will come in January 2019 when they have to pay their tax bills to the end of April 2018. That’s when they will realise they have less of a tax offset on their rental income than they had before. It will get progressively more difficult for them.”

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