Accidental landlords on the wain

The number of homes let by ‘accidental landlords’ has fallen for the first time in five years, a new report reveals.

So-called accidental landlords are those who didn’t buy a property with the intention of letting it out, but who have ended up doing so.

That’s usually because they cannot sell and need to move, or have decided to buy a new home and hold on to their existing property as an investment.

Research from lettings expert Hamptons International has revealed that one in 14 (7.1 per cent) homes that came onto the rental market this year had been listed for sale within the previous six months, the lowest level since 2015.

It says that since tax changes were introduced in the 2018 Budget, the proportion of homes let by accidental landlords has fallen.

The changes that come into being in April 2020 will increase the amount of tax some landlords, who have lived in their rental property at some point, will have to pay if they sell.

Aneisha Beveridge, head of research at Hamptons International, said: “Despite a weaker sales market, which tends to encourage accidental landlords, the proportion of homes to let having previously been listed for sale has fallen for the first time in five years.

“The tax changes being introduced in April 2020 will increase the capital gains tax bill for some accidental landlords who choose to sell after that date.

“Great Britain’s most expensive regions and where prices have risen the most, recorded the biggest fall in accidental landlords.

“This is unsurprising given that landlords in these areas will have seen the greatest gains and therefore could see their tax bills rise the most.”

As well as changes to capital gains tax, bigger potential stamp duty bills for buying another property and changes to tax on rental income have also contributed to the decline in accidental landlord numbers, the agency says.

Previously people could offset all their mortgage interest on the property against rent and only pay income tax on the difference.

However, this is being cut back to a maximum 20 per cent tax credit against mortgage interest, which will be in place fully from April next year.

Total rental revenue is also now added to a landlord’s income to decide their tax rate – previously it was only profit after interest that counted. That potentially means some will find themselves moving up a tax bracket.

To discuss any aspect of these changes and how they may affect you please contact me on 01772 430 000.