Experts warn of further buy-to-let changes

Experts warn of further buy-to-let changes
Aidan Crawley/Bloomberg

Advisers and their landlord clients should not rule out further changes to the private rental sector, according to buy-to-let experts.

A panel at the financial services expo — made up of Adrian Moloney of OneSavings Bank, David Whittaker of Keystone Private Finance, and Steve Cox of Fleet Mortgages — said ongoing political uncertainty and the potential for a change of government could lead to more alterations for landlords, especially in regards to tax.

The panel, which was speaking last week (May 15) did not rule out the idea that a future government could further cut back mortgage interest tax relief for landlords.

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Landlords have already seen the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016 and cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority's tightened underwriting rules.

Mr Moloney said: "I think it would be a very bold move because you’d have to start changing tax legislation potentially across other areas and I think HM Revenue and Customs is currently happy with the level of tax coming from buy-to-let landlords.

"But there is no way of knowing how another government could act."

Mr Whittaker, agreed that a government of a different leaning to the current Conservative one could make changes to the tax system that would "create more waves and more damage".

Labour's Jeremy Corbyn for instance has long spoken of the need to fix the 'broken' housing market.

In January, the Intermediary Mortgage Lenders Association warned that landlords would start to feel the pinch of new regulation in their tax returns for the first time.

And the effects are already visible. UK Finance lending trends, published last week (May 16), showed that about 5,000 new buy-to-let purchase mortgages were completed in March — 9.1 per cent fewer than in the same month in 2018.

The panel was also asked about the recent government proposal to ban section 21 evictions.

Last month (April 15), the government proposed a consultation on abolishing the so-called ‘no fault’ section 21 notices, which give landlords the power to evict tenants at the end of their tenancy without a reason.

At the time, landlords warned there were dangers, such as a shortage of landlords and less competition for consumers, if the reforms were not carried out correctly.

Mr Whittaker said since the announcement, the government had accepted that in order to shake up how a section 21 order works, there had to be an improvement of the processes around section 8 notices — similar to a section 21 but where the landlord has to give a reason.

He said: "There has been a recognition that the government can’t get rid of the existing rules without having something in its place. 

"The government appears to know that if they have a continuing lack of political appetite to run a social housing policy, let alone fund it, they can’t afford to mess up the private rental sector too much."