Landlords tell government to scrap tax changes

Some 201 experienced residential landlords were asked to rank the action they would most like the new government to take in order to help their residential lettings business in Paragon Mortgages’ latest trends report, and a U-turn on the tax changes came top of the list.

Due to be phased in over three years from April 2017, the changes mean higher-rate taxpayers can no longer offset all their mortgage interest against rental income before calculating the tax due.

The news follows reports of landlords fleeing the sector as the tax relief changes began to take effect, with others resorting to limited company borrowing to avoid the hit to their incomes.

In any other business you are allowed to reclaim tax – why should buy-to-let be any different?Jane King

Some 88 per cent of the landlords surveyed by Paragon said they now understand the personal implications of the tax changes – up from 71 per cent six months ago.

John Heron, managing director of Paragon Mortgages, said: “Higher tax charges for landlords have combined with a general increase in uncertainty to drive confidence levels down. 

“However, whilst there are signs of lower demand it would appear that property yields are being maintained and that void periods are close to historic lows. This would suggest that despite the negativity around the market that the private rental sector continues to perform well.”

Jane King, mortgage adviser at London-based Ash-Ridge Asset Management, said she would not rule out a partial U-turn by the government on the issue of tax relief.

“I have got a funny feeling they might have no choice,” she said. “I would not be surprised if they do something on it. There is going to be no property around to rent.

“In any other business you are allowed to reclaim tax – why should buy-to-let be any different? If landlords lobby hard enough there may be a relaxation of the rules rather than a U-turn. With this government, I would not be surprised what they do.”

simon.allin@ft.com