What this year’s changes mean for landlords

From stamp duty to green taxes, it’s going to be a big year for landlords

Landlord Advice

29 March 2017

Earlier this year, then-Chancellor George Osborne initiated some changes that will have a big impact on Britain's landlords.

Some of these have already come into effect, while others are still at the proposal stage. This quick summary tells you some of the things you need to know about the changes, and what they mean for you as a landlord.

Stamp duty increase

The biggest news this year was the stamp duty land tax (SDLT) increase, which took effect from 1 April 2016. The changes create a 3% surcharge on SDLT for people buying additional properties worth over £40,000, including buy-to-let landlords. This could see purchasers paying five times more tax than they would have under the previous regime. The hike is part of a wider government initiative to prioritise affordable home ownership for first-time buyers – a sector that some critics believe landlords have shut out of the market. Following a rush in activity in March ahead of the tax increase, the number of buy-to-let mortgages taken out dropped by 85% in April.

Wear and tear

Landlords of furnished properties were previously able to claim tax relief on 10% of their profits to cover wear and tear, even if no repairs were required. The rules around this have since changed as of April 2016, and now property managers are only able to claim for actual costs incurred. Wear and tear is now treated like other allowable expenses, with itemised receipts required as evidence to support any claims made in your tax return.

Less tax relief on mortgages

Buy-to-let owners should be prepared for the upcoming reduction of mortgage interest tax relief. Currently, landlords can claim back a percentage of their mortgage interest based on their own rate of tax: for example, landlords on the basic rate of tax can claim back 20%, while those on the highest rate receive a 45% tax relief. The new changes mean that, no matter which tax bracket they fall under, property managers will only be able to claim back 20%. This will be phased in slowly over the next four years, with the first moves coming in April 2017.

Proposed 'green tax' for 2018

Another proposal could see landlords paying up to £5,000 for energy upgrades to their properties. Under the recently scrapped Green Deal, landlords could apply for a loan to make improvements, which would then be paid back by their tenants. However, the planned changes will require property managers to bring their properties up to an energy efficiency rating of E and take responsibility for the costs.

The Department for Business, Energy and Industrial Strategy's proposals could come into force as soon as 2018 for new tenancies or 2020 for existing ones. The government states that most landlords won't pay much more than £1,800, but has put a £5,000 cap in place.

No matter what changes might be coming down the line for landlords, landlord insurance will always be able to help make protecting your property simple.