Buy to Let

Almost half of landlords plan changes in response to tax regime

According to a survey by mydeposits, the custodial and insurance-backed tenancy deposit scheme, 44% of landlords plan to make changes to their present circumstances because of the tax situation.

What are the tax changes?

Since April 2016, three major tax changes have impacted landlords. Second home buyers have had to pay a 3% stamp duty surcharge, increasing tax on a £300,000 property from £5,000 to £14,000.

This was followed by the abolition of landlords’ ability to claim a 10% tax break for “wear and tear”, only letting them deduct the costs they incur.

But the most significant change relates to mortgage interest tax relief which was introduced in April 2017.  Landlords can only offset 75% of their mortgage interest against their profits. This will fall to 50% in 2018, 25% in 2019 and to zero by 2020 when it will be replaced by a 20% tax credit.


The vast majority of private landlords who own one or two properties and use buy-to-let as a part-time income supplement, rather than a full-time business. mydeposits says  these landlords could be less likely to keep tabs on legislative changes.

The survey found that 26% of respondents said they were unaware of changes affecting mortgage interest tax relief. A further 23% did not know about the additional 3% stamp duty payable on buy-to-let and second home purchases.

The majority of respondents to the survey (86%) own between one and four properties, while 8% having between five and 10 properties.

One in five (21%) of landlords said the changes will not affect their buy-to-let business, but 25% indicated they will need to increase rents to tenants.  A further 10% plan to sell up altogether, and 9% said they will switch from using a managed service through a letting agent to self-managing in order to reduce outgoings.

Although growing numbers of landlords with several properties are now setting up limited companies to sidestep the new rules, this is unlikely to be viable for smaller landlords. Half (50%) of landlords said they have no intention of leaving the private rented sector, but 25% plan to sell up in the next five years.


Tony Gimple, founding director of Less Tax for Landlords says landlords have four options:

  • Sell up
  • Do nothing (which will be a default decision for many)
  • Set up a limited company, which Gimple doesn’t think is the best move due to remortgage costs and lending inflexibility, and seven layers of taxation in companies including inheritance tax problems
  • Hold property in a “hybrid structure”, which he describes as truly running a portfolio as a property business, whilst at the same time reducing tax leakage to the legal minimum.


Commenting on the changes, Gimple said: “Landlords should be running their buy-to-let portfolio as a business regardless of tax changes, and those forced out of the market will be the ones who are too highly geared with too little yield.

“Many landlords are trying to do everything themselves and often following unreliable or out of context information, whereas once they are professionally educated on what their options are, many choose to remain landlords and go on to prosper.”

Eddie Hooker, CEO of Hamilton Fraser, parent company to mydeposits, commented: “The results of this survey are particularly interesting for the short to medium future of the private rented sector.

“Around 25% of those who responded were unaware of the changes to the tax regime on their existing portfolios which shows that more is needed to be done to help educate the market and help prepare landlords for the changes to their personal tax liabilities over the next few years.

“Even more poignant however, is the suggestion that more than 50% of landlords are considering changing their behaviour to safeguard their income by either increasing rents, turning to self-management or even selling up completely.

“With all the well-meaning efforts that are being made in the market to make the whole renting experience a better place for both landlords and tenants, there is now a clear danger that supply could be restricted with the knock-on effects this may cause. The right tax planning advice and income protection strategies are absolutely crucial.”

To listen to a podcast with landlord tax expert Tony Gimple, Eddie Hooker, CEO of mydeposits and Paul Shamplina, founder of Landlord Action, discussing tax changes for landlords, click here.

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