More than 60% of landlords with private rental properties face being pushed into higher rates of income tax because of Government reforms, according to research.
The Residential Landlords’ Association (RLA) says this is no time for landlords to feel complacent after the Chancellor George Osborne announced in his budget that mortgage interest relief for landlords is to be restricted to the basic income tax rate.
However, the RLA says that landlords who pay the basic rate and believe they are unaffected by the changes will find themselves being pushed into paying a higher rate of income tax despite their income not increasing.
That’s because the tax change for landlords will be applied to turnover and not profit.
From their research, the RLA says that of 1,200 landlords they questioned who are currently paying the basic rate of income tax, more than 60% said the rule change would see them paying a higher or additional rate of tax.
Impact of mortgage interest relief reforms affect landlords
Now the RLA has met with Treasury officials to raise its concerns about the impact of mortgage interest relief reforms and how this will affect landlords investing in new housing for rent.
David Smith, the RLA’s policy director, said: “Our findings are deeply concerning and many landlords who pay the basic rate of income tax are facing a nasty surprise when they meet their account.
“Those who felt the budget measures did not affect them will now reconsider whether they should continue in a market facing this tax bombshell.
“It cannot be right that landlords are facing an income tax increase without their income increasing.”
He said the RLA is calling on the government to assess how the proposed reforms will impact the private rental sector.
Tenancy deposits likely to be lost by students
Meanwhile, the Deposit Protection Service (DPS) says that students are the most likely to lose part or all of their deposit when their tenancy comes to an end.
That’s because they leave the property in a poor condition, according to DPS research.
Their study has found that less than one in three students received 90% of their deposit whereas more than half of other tenants do so.
Reasons for deposit deductions
Reasons for deposit deductions include cleaning (32%), repairs (27%), redecoration (20%) and replacing damaged or lost items (19%).
The DPS has now issued help and advice to enable students to claim their full deposit back when they vacate a rental property.
