Propertymark has called for the Government to review the impact of tax and financial changes on landlords.
The trade body analysed the impact of changes to the private rented sector (PRS) using data from members and other private and public sector organisations.
Propertymark highlighted what it said was the detrimental impact that Government decisions have had on the tax and financial situation for landlords, contributing to a serious lack of available rental properties.
Many landlords have faced rising expenses and ongoing legislative changes, with more proposed amendments on the horizon.
Propertymark’s position paper, ‘Impact of Tax Changes on the Private Rented Sector’, outlined its recommendations to incentivise and increase the number of properties to rent.
Under Stamp Duty Land Tax rules in England and Northern Ireland, a buy-to-let landlord purchasing an additional property for the average UK price of £290,000 would pay £10,700, when a main resident would only pay £2,000.
In Scotland, Land and Buildings Transaction Tax on an additional property valued at the average Scottish price of £185,000 would be £11,900 for a by-to-let investor, with a main resident only paying £800.
In Wales, a buy-to-let landlord would pay nearly £10,000 in Land Transaction Tax for an additional property, based on an average Welsh house price of £215,000, when a main resident would pay nothing.
A significant change since 2016 has been the Capital Gains Tax (CGT) for individuals owning property; in March 2016, rates were cut significantly for top-rate taxpayers from 28% to 20%, and from 18% to 10% for lower earners.
However, landlords were excluded from the cuts, meaning that while the sale of shares in a company that owns the property would incur CGT at 20%, individuals making reasonable gains on the sale of a second property would face the existing 28%.
Other burdens included a reduction in the available tax relief on mortgage interest costs and the removal of the 10% wear and tear allowance for fully furnished properties making these cumulative changes result in a system with limited opportunities for small investors because the ability to offset finance costs against tax liabilities has been eroded.
In light of this, Propertymark said that Government must recognise the impact of the current tax regime on the availability of homes in the private rented sector and ultimately the costs passed on to tenants.
The trade body encouraged the Government to look at six key areas effecting the sector and offer motivations for landlords to continue investing.
These key areas include a review of the taxes that apply to private landlords, mortgage tax relief, a reduction of taxes on additional properties, tax relief for energy efficiency, a reduction of CGT thresholds and rent controls.