11:01 AM, 28th December 2022, About a month ago 19
An accountancy firm says that 70,000 buy-to-let landlords have exited the UK’s rental market over the last 12 months.
UHY Hacker Young analysed HMRC data and reveals that the UK’s 2.82 million landlords in 2021 have now fallen to 2.75 million.
That means the rental market lost 116,000 buy-to-let properties and tenants saw rents rocketing.
The firm also says that the big reason for landlords exiting the market is down to the substantial tax increases they have had to endure in recent years.
Previously, landlords could deduct their finance costs, such as mortgage interest, to lower their income tax bill.
That rule was changed in 2017 and the claimable amount was tapered to end completely in 2020.
The result was that most landlords paid tax on their property income – and growing numbers found they were pushed into a higher tax bracket and then made a loss as a result.
The tax landscape also saw the ending of landlords claiming ‘wear and tear’ expenses from rental income.
Landlords also saw a reduction in private residence relief in 2020 which pushed up their Capital Gains Tax bill when selling a rental property that was previously their main home.
In addition, landlords also pay a 3% Stamp Duty surcharge which has put some landlords off from investing – and prevented new ones from entering the PRS.
A UHY Hacker Young spokesperson said: “We have seen an increasing number of landlords selling off or reducing their portfolios over the past year.
“Less favourable tax treatment has encouraged this exit from the sector, as well as dissuading newcomers from entering the market.”
They added: “Reducing the number of properties for rent by driving landlords out of the market doesn’t benefit tenants as it adds to the upward momentum on rents.
“The decrease in available properties has led to increased competition amongst renters.
“Landlords who have managed to stay in the market have benefitted from rising rents as a result of this excess of demand over supply.”
In the UK, rents have risen by 15.2% over the last five years, says the Office for National Statistics, and Rightmove says that rents will continue rising in 2023 – especially in London with demand from tenants rocketing.
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