Landlords leaving in droves due to tax policies

Rental income £20000
Rental expenses £10000
Finance costs £15000
Cash loss £(5000)
Tax position for higher rate taxpayer:
Rental income £20000
Rental expenses £10000
Rental profit £10000
Tax @ 40% on £10000 = £4000
Tax relief @ 20% on finance costs £10000 (restricted) x 20%=£2000. Tax payable £4000-£2000=£2000
So, not only has the landlord made a £5000 loss on rental, but he or she has to pay £2000 tax on that loss!
On top of this, landlords have to comply with a raft of legislation and it can take 6+ months and lots of costs to get a defaulting tenant out.
No wonder landlords are leaving in droves!!

Its only worth staying in the market if you have a very small but to let mortgage or, better still, not a mortgage at all. Maintenance of £10k is high and wouldn't be this every year unless you have a very old property.

Reply to the comment left by Pamthomp33 at 05/09/2023 - 12:25
The problem with no mortgage is the poor ROI, particularly in the south. The risks with BTL have significantly increased over the last 10 years and are not showing any signs of slowing - in many cases the yields no longer justify this level of risk and personal involvement.

Reply to the comment left by Pamthomp33 at 05/09/2023 - 12:25
It doesn't matter whether that level of maintenance is normal or not - it's the fact that this scenario can happen at all that is relevant. Why can a landlord who is incorporated deduct finance costs but not one who isn't? It's not right.

Reply to the comment left by Debra at 05/09/2023 - 14:36
Correct, it was only an illustration.

But £10k is not extreme. By the time agent's fees, repairs, service charges, insurance, legal fees to evict tenants, etc are taken into account many landlords face this sort of expenditure.

This is all just part of the wider culture wars where someone or a group pins the blame on another person or group of people for one or other of society's problems. This is usually in order to gain popularity for themselves or to pursue some other agenda like financial gain by persecuting and decimating the victim group. This has been practiced for centuries by populists, and indeed the term "decimate" dates from Roman times when every tenth man in a mutiny would be executed as a warning to the others to fall in line.
The government are intent on decapitating the PRS even though it is just a symptom of their long term policies of not providing social housing or building enough houses for everyone to live in via whatever tenure suits them best. They despise tenants as much as landlords and of course they know perfectly well what the effects of their policies will be, which is to take out enough landlords to drive up rents so that the mega corporations will be able to compete with the inherently lower cost of the regular PRS.

Reply to the comment left by Debra at 05/09/2023 - 14:36
Gov declared war on the private landlord, full stop.

Once Sunny September is out of the way and long rainy evenings set in with the burning sun fading and enticing us to the east, self assessments will be contemplated over Aldi Merlot and the realization (already there) will finally set in that it's no longer worth staying in the rental sector and this year we are financially screwed.

For the lucky ones (like us) who incorporated, we will be making decisions (with age in mind) to sell a few and pay off others or screw it and slowly sell the entire portfolio.

This will be the autumn reality. For the ones who put off Self Assessments till end of Jan, they will flood the market with their BTL sales in spring.

Question : Where will tenants go if many landlords sell up?

I feel sad for fellow landlords and for tenants who didn't bargain for this. Thank you government for making everyone poorer at the same time.

If I was still coding, a crass statement would be; GOTO top of page.

Probably a good thing. All that borrowed money that is pumping up the value of properties once repaid should lower house prices and allow more renters to buy them. Hopefully this will bring house prices closer to incomes.

Reply to the comment left by Philip Jones at 05/09/2023 - 16:15
Fair comment. Supply and demand will dictate the market at the time.

Does anyone have any news on repossessions due to current boe rates?

Reply to the comment left by Philip Jones at 05/09/2023 - 16:15
Inflation taken into account or not?