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Should Smaller Landlords be Concerned About Tax Reforms?

A number of tax reforms have been announced in the past 12 months which will be introduced over the next few years, designed to make the market less favourable to landlords and more favourable for first-time buyers. Many of these measures have been primarily aimed at big-time, professional property investors, and this has left many smaller landlords unsure about whether the tax changes will affect them.

There are a considerable number of smaller-time landlords in the UK, some of whom are termed as “accidental landlords” (those with an extra property to rent out after inheriting it, or after getting married to somebody who also owned a property).

The first thing that should be pointed out is that everybody's circumstances are individual.

Basic or higher rate taxpayer?

If you pay tax at the basic rate, key reforms will simply bypass you. For example, one of the reforms will see mortgage interest relief capped at the basic rate of tax, but if you are paying the basic rate anyway, then you will be unaffected. This will combine with another key change to tax on mortgaged properties; mortgage interest will no longer be deductible from taxable profit.

However, if you are close to the threshold for the higher rate, you cannot be sure that changes aimed at higher rate taxpayers will simply pass you by, because the way tax is calculated will be set for a change. This could potentially push you into the next bracket, and make you vulnerable to the full force of the reforms.

If, on the other hand, you are a basic rate taxpayer and are likely to stay that way, then you will most likely find that your situation does not change a great deal as the reforms roll out.

Investment Properties

It is worth noting that these reforms are aimed at individuals who own investment properties, not companies. Landlords who hold buy-to-let property investments via a limited company will be sheltered from the reforms – something that many of the worst-affected investors are likely to take advantage of in order to protect the income they receive from their investments.


Another thing to consider is whether you plan to remortgage your property – or indeed to seek out a new mortgage to buy an additional property. From the beginning of 2017, changes will be made to affordability criteria, and this could make it harder for landlords to find good mortgage deals without bigger deposits and/or higher rents.

Author: Mark Burns

Hopwood House

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic.

Published on 9th December 2016
(Last updated 23rd March 2018)

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