Buy to let landlords may be forced to raise rents or even sell their properties because of the government’s new tax regime, warns a specialist lawyer.
Graham Ireland, private client partner at WHN Solicitors, says the government is using landlords as scapegoats for problems faced by first time buyers. Instead, Ireland claims one of the real reasons people cannot get onto the property ladder is that lenders are demanding higher interest rates for those borrowing high percentage mortgages.
His comments follow National Association of Landlords research showing the new rules will mean one in four UK landlords face a hike from the 20 per cent basic rate they pay now to the 40 per cent higher rate once the new rules come into force from April 2017.
When the changes are fully phased in in 2021, landlords will no longer be able to deduct mortgage interest payments, or any other finance-related costs from their turnover for tax purposes, says Ireland.
“We have two landlord clients with large portfolios who have decided to sell some of their properties because of the upcoming changes and the changes that have been implemented over the last few years. One of them has over 30 properties. Their view is that the government seems determined to penalise landlords" says Ireland.
“They have no doubt that the changes will result in rents being increased, partly because of supply and demand and partly because landlords will need to recover some of their extra costs by raising rents.”