A survey of over 600 UK landlords from Simply Business, one of the UK’s largest providers of small business and landlord insurance, has found one in three (33%) landlords saying that their properties are not as profitable as they once were due to the reduction of buy-to-let mortgage tax relief.

The mortgage interest tax relief landlords could claim was gradually reduced by 25% each year from April 2017 and reached zero in April 2020, when buy-to-let mortgage relief was replaced with a 20% tax credit. The 2021-22 tax year is the second full tax year in which landlords only get this credit.

The controversial tax changes reduced profits for many landlords, who were previously able to deduct all of their mortgage interest from rental income and pay tax solely on the profits.

32% of landlords surveyed said rising taxes have been one of their key challenges, while 11% said they’ve had no choice but to pass the cost of tax increases on to their tenants in the form of higher rents.

For 16% of landlords, the impact of the buy-to-let mortgage tax changes  caused them to sell a property or consider selling one.

Government plans to introduce a national landlord register and scrap Section 21 evictions, leads half of landlords surveyed to say they’re worried about further regulation of the rental market, and 58% claim that confusing and rapidly changing government legislation is the biggest challenge they currently face.

45% of those surveyed said that the rising cost of being a landlord is the most significant threat to the future of the rental market. Almost one in five (18%) said they’re worried about the knock-on effect it could have on their ability to maintain their properties.

Despite the impact of the buy-to-let tax changes, 22% of landlords said they would reconsider selling their properties if they had more clarity on legislation and regulation from the government.

Just 18% remain optimistic about their ability to generate income and almost a third said they expect to see their rental yield increase by up to 5% this year.

Meanwhile, almost a quarter (23%) of landlords said they’re planning to buy another property this year.

Alan Thomas, UK CEO at Simply Business, commented:

“Contributing over £16 billion annually, if a wave of residential landlords were to sell up then it would have a huge impact on the UK economy.

“What’s more, with landlords offering much-needed accommodation to over 4.4 million households, the hit to our communities could be devastating.

“It’s crucial that we recognise both their importance, and the support required by landlords to manage the challenges they face – including changes to government legislation, such as the reduction of buy-to-let mortgage tax relief.”