New stats show that housing providers are making less money – and industry experts warn that high taxes could finish them off.
HM Revenue and Customs (HMRC) reported last month that in 2022-23, the latest tax year with available data, individual landlords earned £47.44bn, compared to £49.4bn the year before.
The fall in reported income comes in spite of rising rents. The Office for National Statistics reported that rents rose by 8.6% between July 2023 and July 2024. But while HMRC found a small fall in the number of people declaring property income, landlords also declared less income from property on average – £16,700 in 2022-23 compared to £17,300 in 2021-22.
Some care does have to be taken with these numbers. The HMRC report only covers unincorporated landlords, and was taken during a year when record numbers of landlords set up limited companies, according to Hamptons.
But it could also indicate that landlords are downsizing their portfolios, even if most haven’t yet exited the market completely.
Tax to cut landlord profits further?
Landlords’ pre-tax incomes have fallen slightly, but industry experts warn that the real threat to profitability comes once HMRC has taken its cut.
Last month, Propertymark released a report on the impact of Section 24, which took away landlords’ ability to deduct their full mortgage interest from their taxable income from 2021-21 onwards. Landlords who responded to the survey reported scaling back investment plans, selling properties and cutting back on maintenance to recoup their losses.
Industry experts are now warning of another incoming tax bombshell for the private rented sector. The government is reportedly planning to raise Capital Gains Tax rates, potentially bringing them into line with income tax. Currently a basic rate income taxpayer would pay 18% of any capital gain they made on residential property (apart from their primary residence, in most circumstances), while a higher rate payer would pay 24%. If that came into line with income tax, these percentages would go to 20% and 40% respectively – and potentially 45% for additional rate taxpayers.
CGT is only charged when the property is sold, so it wouldn’t affect the day-to-day profitability of a rental property. But many landlords invest for capital growth, and their gains would be significantly reduced by a CGT hike. In the short term, this could dissuade landlords from selling – and potentially trap some in the rental market. But in the longer term, industry experts say that it is likely to put off new investment and shrink the private rented sector.
Other landlord headlines:
Landlords need cash to meet EPC deadline, Propertymark insists – The Negotiator
Pets in Lets are good for landlords as well as tenants, insists charity – Landlord Today
Landlord organisation proposes Tenant-Landlord Partnership Bill to tackle rental crisis – Property118
