landlord tax changes 2020
26th November 2019 by Property Deal Store Administrator in Investors, Legislation

Landlord Tax Changes: The Implications

By now you’ve probably heard about Section 24, the new tax laws for landlords coming into force in April 2020. Here we look at what’s happening and what it means for you.

It’s important to keep on top of all the new regulations coming next year. So much so that our last two articles have majored on two other significant changes that will also come into play in April:

Capital Gains Tax Changes are Coming

Energy Efficiency Standards Tightening for Private Rented Sector

There’s no doubt this myriad of concurrent changes will negatively impact profitability so it’s time to make some tough decisions…

Is being a landlord something that you still want to do, and, is it still a viable business?

Of course, these changes will affect landlords in different ways. Do the research you need to do, check your own implications and then decide on your strategy.

Section 24

Section 24 relates to tax relief for financed properties.

It stipulates that from April 2020 landlords can no longer claim any tax relief on their property finance – such as a mortgage. 100% of rent will be classed as income and finance costs won’t be tax deductible.

So, tax reliefs are diminishing in a big way. The changes under Section 24 along with the Capital Gains Tax changes could leave you seriously out of pocket. Not only that, you will need to spend more on energy efficiency for each new let.

One option could be to buy and hold properties in a company if you’re a higher rate taxpayer, but this comes with its own potential issues, such as raising finance. Take independent advice on this option.

All this begs the question, when will this government onslaught on landlords end?

Well, maybe never. Or at least not anytime soon.

Why all the changes?

The government will do all it can to support first time buyers, which unfortunately means they want to eliminate landlords as much as possible.

Ultimately, they don’t see letting properties as the business that it is. They see it as something the wealthy do to the detriment of young buyers. This narrative frames most policy.

But what about the actual issues?

It’s not black and white, yet landlords are the scapegoats for seemingly all the problems in the housing market.

A shortage of quality homes is the underlying issue. Why then, are the government looking to punish landlords who are bringing sub-standard and disused properties back to life?

Then there’s the issue of property prices! A lot of would-be first-time buyers need to rent while they build their savings pot. They need good quality private housing, yet if this tirade against landlords prevails, why would investors continue to provide these rental properties that are so much needed?

What are you going to do about it as a landlord?

As you can see, these issues run much deeper than simply an over population of landlords, yet that probably won’t make much of an impression on government policy. The attack on the livelihoods of landlords isn’t set to change in the short, medium, or long term.

So, you need to play the game that you are in now.

Carefully consider the implications of all these changes and make big decisions well before April on what you want to do.

Will you look to offload your portfolio as quickly as possible?

Will you hang tough and ride out the storm and see what happens in the long run?

Or perhaps, you might even look at this as an opportunity to buy up low-priced stock from runaway landlords…

There’s always opportunity in change. On this occasion it depends on whether you’re still interested in that opportunity.

How we can help

Property Deal Store connects property sourcers to property investors. Sourcers negotiate and package the deals before listing them on the site for purchase by investors.

This is the platform the industry has been crying out for. We have created this website with a clear mission in mind: to be the go-to platform for investors to build a successful property portfolio whilst facilitating the development of a successful career in property sourcing for our sourcers.

If you’re looking to offload your properties, why not list them on the site?

If you’re looking to maximise your opportunity, then have a look at all our available deals here.

“Be fearful when others are greedy and greedy when others are fearful” Warren Buffett

For more information on Section 24 itself, check out our article – How Section 24 or the ‘Tenant Tax’ Affects Property Investors

If you have any questions or simply want to find out more, call us on 01282 711561 or email office@propertydealstore.co.uk.

-Janice Minihan, director and co-founder of Property Deal Store