The exemption of residential property from the new capital gains tax cuts tops the list of concerns for landlords over the next 12 months, new research shows.
According to Amicus Property Finance, nearly two-thirds (63%) of landlords believe Chancellor George Osborne’s decision to maintain existing Capital Gains Tax rates on residential property sales while reducing them by 8% on assets will be their biggest challenge.
In the Budget, the higher rate of Capital Gains Tax was cut from 28% to 20% and the basic rate from 18% to 10%.
The government said that retaining the 28% and 18% rates for residential property was intended to provide an “incentive for individuals to invest in companies over property”.
The abolition of tax relief on mortgage interest is also a serious concern for landlords, with 61% of landlords seeing it as a concern.
From April 2017 landlords will no longer be able to claim tax relief worth 40% or 45% of the interest payments on their buy-to-let mortgages. Instead, the maximum tax relief will be set at 20%, although the change will be introduced over a four-year period.
This was followed by the tax changes to maintenance and improvements (57%), whereby landlords will only be able to claim for wear and tear costs actually incurred on replacing furnishings when calculating taxable profits. Increasing costs being passed on from the Right to Rent legislation (53%) and rising legal and accountancy fees (52%) were in fourth and fifth places respectively.
Fewer than half (44%) of landlords expressed concern about the impact of Brexit and only a third (34%) are worried about accessing long term finance to grow their portfolios.
John Jenkins, CEO of Amicus, said: “The tax landscape has become a lot more hostile for landlords and it’s no surprise that this dominates their list of concerns for the year ahead. In contrast, the prospect of interest rate rises, the threat of falling property prices and difficulties in accessing long term finance are less likely to be keeping landlords awake at night.
“Despite the new tax changes, we are seeing a sustained and growing appetite for property finance driven by the inability of some lenders to act sufficiently quickly to respond to demand. We’re anticipating a strong 12 months for the professional buy-to-let market.”
| Concerns for landlords over the next 12 months | |
| Changes to taxation impacting treatment of capital gains | 63% |
| Changes to taxation impacting treatment of rental income | 61% |
| Changes to taxation impacting treatment of maintenance and improvements | 57% |
| Increasing/changing costs being passed on from the Right to Rent legislation | 53% |
| Rising professional fees – legal and accountancy | 52% |
| Changes in legislation that favour large financial institutions investing in rental portfolios | 51% |
| The threat of rising interest rates | 49% |
| Fall in property prices or rental yields | 49% |
| Changes in national planning rules | 45% |
| The impact of Brexit on the UK economy | 44% |
| Changes in local planning rules | 40% |
| Access to new long term finance to grow my property portfolio | 34% |
Source: Amicus Property Finance (May 2016)
