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The number of private landlords in the UK has been reported as hitting a seven-year low with an estimated 222,570 leaving the sector since the Government began to increase the burden of taxation.

2016 saw the introduction of a 3% stamp duty surcharge on additional homes coupled with tighter mortgage lending regulation.

Loan Interest Restriction

In 2017, a tax credit started to replace full mortgage interest relief over a four-year period so effectively the final scrapping of tax relief on mortgage interest payments comes in to force after 6th April 2020.

The full implications of this stealth tax are only just starting to be understood by many who quite justifiably thought it meant that instead of getting tax relief at 40% they would only get relief for mortgage interest at 20%. Unfortunately, this is just the headline, the lemon next to the pie.

The landlord with income of £120,000 before mortgage interest of £20,000 is now, all other things being equal, paying an additional £12,000 of tax. Clearly, this is a whole lot more than 20% of £20,000 of interest. This landlord has just lost all of their personal allowances because of the stealth tax impact of the so-called tax credit.

Case Study

Let us look at a less extreme example. Mrs Middle Class England has employment earnings of £50,000. 5 years ago, she inherited £50,000 and decided to buy a property to let for £250,000 using her inheritance and a mortgage of £200,000.

The property went on the market at £850 per month and after expenses, she has net rents of £10,000 per year. Being a single parent with two children to care for, her credit rating had suffered a bit so she has to pay interest on her mortgage at 5%. It was the best deal she could secure.

Mrs England’s accountant has just told her that her self-assessment tax liability, which was £nil, four years ago, is now £2,000 and by the way, she has lost £1,800 of child benefit. Her circumstances are unchanged.

Is it surprising that she feels ‘picked on’ by the taxman?

What can I do about it?

It is likely that for many landlords this will be the final straw. There is some evidence that a growing number of landlords are looking to sell properties because of the increased tax burden on the sector. The number of privately rented homes has fallen by 156,410 since its peak of 5.29m in 2017. There were 2.66m landlords in 2019, the fewest since 2012 when there were 2.58m.

However, there are ways to avoid the stealth taxes. Talk to your expert Haines Watts tax adviser to see if your property portfolio could be re-structured more tax efficiently. You can also find more in our fact sheet.

Want to know more? Call us on 01392 260310 or email

About the author

David Park

David is a Fellow of the Institute of Chartered Accountants and has worked exclusively in professional accountancy practices in and around Exeter for over 25 years. He has an extensive knowledge of local business issues.

He is particularly experienced in bringing financial direction to the client’s board room. To succeed in business financial strategy is paramount and yet many smaller businesses do not have the resources to recruit internal finance directors.

David has been a business owner since 2005 and an equity partner at Haines Watts since 2013 specialising in providing strategic business and taxation services to owner-managed businesses.

David spends his time working between the Crediton and Exeter offices.

Outside of work he is a voluntary governor at his children’s school and a director of Crediton Rugby Football Club.

David remains hopeful of becoming a professional surfer one day but after 40 years of practicing without getting any better this might not happen.

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