Landlords need to make the most of buy-to-let tax relief


As the 2021-22 tax year has come to an end, it’s important landlords are making full use of all available buy-to-let tax relief. This has become especially important due to the impact of tax changes on landlords.

Getting your taxes right is crucial for buy-to-let landlords. Even though some may employ an accountant to take care of this, it’s still key to know what the latest rules are and what buy-to-let tax relief is available.

A survey by Simply Business of more than 600 landlords has found that one in three landlords have noticed that their properties are not as profitable as they once were due to the reduction of the buy-to-let mortgage tax relief.

From April 2017, the mortgage interest tax relief landlords could claim was reduced by 25% each year until it reached zero in April 2020. At this point, mortgage relief was replaced with a 20% tax credit instead. The 2021-22 tax year is the second full financial year where landlords can only use this credit.

This has hit some landlords’ profits as they were previously able to deduct all of their mortgage interest when calculating rental income and then paying tax solely on their profits. This has been one of the major changes impacting landlords in recent years.

Rising taxes has become a key challenge for landlords

In the survey by Simply Business, 32% of landlords said rising taxes have become one of the key challenges they’re facing. Some admitted they had no choice but to pass on the cost of tax increases onto their tenants through higher rents.

Additionally, 45% of those surveyed said that the rising cost of being a landlord is the most significant threat to the future of the private rented sector.

Alan Thomas, UK CEO at Simply Business, comments: “Contributing over £16 billion annually, if a wave of residential landlords were to sell up then it would have a huge impact on the UK economy.

“What’s more, with landlords offering much-needed accommodation to over 4.4 million households, the hit to our communities could be devastating.

“It’s crucial that we recognise both their importance, and the support required by landlords to manage the challenges they face – including changes to government legislation, such as the reduction of buy-to-let mortgage tax relief.”

Landlords are claiming buy-to-let tax relief in other areas

During 2021, landlords claimed more in buy-to-let tax relief than the previous year, according to new research from ludlowthompson.

Despite a reduction in the amount of relief landlords could claim on mortgage interest, the total amount of tax relief claimed by landlords rose from £18.1bn in 2020 to £18.5bn in 2021.

Loan interest still made up the most significant portion of tax relief claimed by landlords at £6.9bn, which amounts to 37% of all reliefs claimed by landlords. Property repairs, maintenance and renewal made up 24% of the overall figure at £4.5bn.

Buy-to-let tax relief can also be claimed on a number of other costs, including professional fees, such as for letting agents and accountants, and insurance.

Some professionals in the industry think there should be more tax benefits for landlords, especially those who are improving the energy efficiency and quality of their rental properties.

Stephen Ludlow, chairman of ludlowthompson, says: “There is a strong argument that the Government should provide more generous tax benefits for property improvements.

“This would incentivise landlords to make upgrades which would improve the overall quality of UK housing stock.”

At BuyAssociation, we work with a number of partners who can advise buy-to-let landlords on tax. Contact us for more information, and browse the property investment opportunities we currently have available.

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Landlords need to make the most of buy-to-let tax relief


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