UK government buy-to-let tax cut

Industry body continues to ask for tax cut for landlords

Tenant demand remains sky-high in the private rented sector, with landlords seeing unprecedented appetite for properties, and the NRLA believes a tax cut could help. 


Getting onto the property ladder remains a difficult feat for many in the UK, and this is adding to the number of people who remain living in rented accommodation. Alongside some landlords leaving the sector, whether to cash in on their gains or due to financial reasons, pressure on housing supply is high.

One recent study from Censuswide revealed that around one in five aspiring homeowners don’t expect to get onto the housing ladder until they are in their forties – and a high proportion of these will be renting in the meantime. Saving for a deposit was cited by 31% as the main reason for this, while 44% said it was mortgage affordability.

For buy-to-let landlords, this is resulting in ever-increasing rental prices – which have risen by 15% since January 2022 according to the Office for National Statistics – with rental yields also on the climbing.

For mortgaged landlords, this is going some way towards covering the increased cost of borrowing that is being faced by homeowners and investors alike, while they are also finding their rental homes snapped up quickly by tenants.

However, at current levels with demand significantly outstripping supply in some areas, many in the industry argue that the present situation is not sustainable, and that more should be done to support the private rented sector – both tenants and landlords – to encourage investment and therefore provide more homes.


Could tax cuts help?

The National Residential Landlords Association (NRLA) believes that tax cuts could be one way of boosting the sector by bringing more landlords back into the fold, or encouraging existing ones to expand their portfolios.

One tax cut it suggests is through abolishing stamp duty on second homes where the property is adding to the net supply of housing. The NRLA called for this in the lead up to the spring budget, pointing to analysis by Capital Economic which showed that this would create almost 900,000 new private rented homes across the UK.

It also suggests a capital gains tax cut for landlords and investors, as well as reversing the “unfair change” to mortgage interest tax relief, which has led to many landlords facing higher income tax bills due to no longer being able to claim the full amount of mortgage interest payments on the property.

The NRLA highlights the impact that changes to mortgage interest relief in particular have had on the sector, pointing out that 82% of buy-to-let loans are interest-only, meaning they are also the most affected by recent mortgage rate hikes across the market over the last two years.

Implementing tax cuts could relieve pressure and incentivise property investors and landlords, meaning more homes for tenants and an end to the steep rental price hikes we have seen. Other industry bodies have also called for a stamp duty tax cut to stimulate investment in the past.


“Positive action” is required

The NRLA’s latest call for action from the government, including bringing in tax cuts for the sector, comes in response to the Resolution Foundation’s latest report, titled “Through the roof: Recent trends in rental price growth”, which looks at the drivers behind the rapid increase in rents over the past two years.

The NRLA challenges the report’s assertion that wage growth is largely driving the rising rents, as it believes the situation is much more complex, much of which stems from the demand-supply imbalance.

Chief Executive Ben Beadle said: “As the report highlights, an increasing number of people at all stages of their life now rely on the private rented sector.

“However, with demand far outstripping available supply, there are an average of 15 prospective tenants chasing every rented property, double the pre-pandemic level.

“The impact of rising interest rates and tax increases should not be downplayed. 82% of buy-to-let loans are interest only and the number of buy-to-let mortgages in arrears more than doubled in the final quarter of 2023 compared to the year before.

“As the Institute for Fiscal Studies said, the more harshly landlords are taxed, the higher rents will be.

“Ultimately, a healthy rental market is one in which there is a supply of rented housing to meet ever growing demand. Ministers need to act to support the sector by developing pro-growth tax measures to deliver this.”

Read more UK housing market and property investment news. 

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