Brexit least of landlords’ worries

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You would think that the referendum on Britain’s membership of the EU would be at the forefront of property investors’ minds this month.

But with just a week to go until the in/out vote, it seems that the possibility of Brexit is not at the top of the list of worries for UK landlords.

In fact, when professional landlords were asked to prioritise their business concerns for the coming year, the impact of the result of the vote only just scraped into the list of the top ten.

Instead, changes in the tax laws appear to be the issues keeping landlords awake at night.

The exemption of residential property from the new Capital Gains Tax (CGT) cuts tops the list of concerns expressed by professional landlords for the health of the sector over the next 12 months, according to the research by Amicus Property Finance, which specialises in short-term property lending.

Nearly two thirds of landlords cited the Chancellor’s decision to maintain existing CGT rates on residential property sales, while reducing them by 8 per cent on assets, as the biggest challenge to the success of their business in the coming year.

The second place on the list of concerns is also taken up by the actions of Mr Osborne; namely his abolition of tax relief on mortgage interest which was announced at the same time as the CGT changes in the autumn statement and means that landlords will no longer be able to claim tax reliefs worth 40 per cent or 45 per cent of the interest payments on their buy-to-let mortgages.

Instead, the maximum tax relief that can be claimed will be set at 20 per cent, although the change will be introduced over a four-year period.

On the list of concerns, this was followed by the tax changes to maintenance and improvements, whereby landlords will only be able to claim for “wear and tear” costs actually incurred on replacing furnishings when calculating taxable profits rather than adding the estimated costs.

Increasing costs being passed on from the Right to Rent legislation and rising legal and accountancy fees were in fourth and fifth places respectively.

Less than half of landlords expressed concern about the impact of Brexit and a third said they were worried about accessing long term finance to grow their portfolios.

Other concerns include changes in legislation which are seen to favour large financial institutions investing in rental properties and falls in property prices or rental yields.

John Jenkins, chief executive of Amicus said: “The tax landscape has become 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, 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.”

Louise Ferguson is a freelance property writer with a small buy-to-let portfolio