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Rumour is that it no longer pays to be a landlord… There are almost 5.5 million buy-to-let properties (and rising) in the UK. But this number is at risk from the rising popularity of short-term and holiday lets. Could we see a rental property crisis as a result?
Research carried out by ARLA Propertymark on UK landlords found that landlords of 230,000 properties in the UK (4% of the whole residential rental market) were “very likely” to switch to short-term lets. Those accounting for a further 470,000 properties (almost 9%) said that they were “fairly likely” to switch.
We’ve put together 8 probable, but big, reasons why it no longer pays to be a landlord:
Once upon a time, buy-to-let properties were not only a big money maker but they afforded UK landlords tax reliefs that made their property businesses exceedingly lucrative.
Borrowing money through mortgages was no longer as advantageous. Before, you could deduct your mortgage interest payments from your tax bill. This meant that you were only taxed on your profits (i.e. what you earned in rent minus what you paid for the mortgage). From 2017, this allowance was gradually reduced.
By 2020, you couldn’t offset your mortgage interest at all. You’re now taxed on all of your rental income and you get a 20% tax credit (the Basic Rate). This affects anyone earning over £50,270 significantly – earners in the higher tax brackets and we may see a boom in limited companies owning buy to lets to less the tax blow.
From April 2025, holiday let owners will lose mortgage interest tax relief, in accordance with the Section 24 rules that residential landlords have.
Quickly calculate how much tax you would need to pay on your rental income.
Your total rental income tax that you have to pay to HMRC depends on three things:
In your case you earned £18,000 from renting out a buy to let property, on top of £38,000 from other sources.
Your rental earnings are £18,000
You can claim £1,000 as a tax-free property allowance.
As a result, your taxable rental income will be: £17,000
The first £12,270 will be taxed at 20%: £2,454 in rental income tax.
The next £4,730 will be taxed at 40%: £1,892 in rental income tax.
So your total tax bill ends up at £4,346
You need to save
to pay your £4,346.00 tax bill by 31/1/2026 which is in 666 days
From June 2019, landlords and lettings agents were no longer able to charge tenants for “the grant, continuance, assignment, termination or renewal of an assured shorthold tenancy or licence agreement”. This was welcomed by renters, making it more affordable to live.
But what does it mean? Well, it also prevents agents from charging disproportionately high fees for services like printing out contracts or renewing agreements.
But for landlords, this meant that they also weren’t able to charge tenants for third party costs such as:
As a result, the cost once again had to come from the landlord’s pocket.
Following Brexit (and more recently, the global pandemic 😬) travelling abroad for weekend breaks for many people was sidelined. Instead, we opted for the staycation. More and more Brits stayed UK-bound for their short trips, exploring the delights of British beaches, countryside and cities.
With the increased tax implications of buy-to-let properties, it’s not surprising that landlords considered this trend a fresh opportunity.
And that leads nicely onto the next point. Airbnb! The popularity of the platform as a money-making tool has not gone unnoticed.
And whilst landlords are having to pay more to keep the fires of their buy-to-let businesses burning, the pull of Airbnb gets ever stronger.
In fact, one in 10 UK landlords said that they might make the switch, especially those with more than five properties. It no longer pays to be a landlord… only.
We couldn’t make this list without mentioning the elephant in every room. The COVID-19 pandemic. Whilst the ramifications hit the sharing economy (e.g. Airbnb) especially hard, the prevalence of staycations were even easier to get involved in. And this only increased with restrictions on tourism abroad.
That said, Airbnb hosts ironically faced the opposite issue to landlords. Many are turned to the live-in-landlord short-term let to supplement their income after months of lockdown.
Read more about this here.
In the 2022/23 parliamentary session, the government will introduce a Bill that will put an end to unfair evictions of tenants. Landlords may no longer be able to evict their tenants at short notice, and without good reason. They are also known as “no-fault evictions”.
Whilst this is an undoubtedly positive step for renters’ security, it’s not necessarily for landlords. For those that handle long-term lets, they could end up left with bad tenants who damage the property or often don’t pay their rent on time. And this is a position that many landlords don’t want to risk facing.
Finally, the obvious one. In many scenarios, renting your home via Airbnb or for general holiday rental brings in more money than lettings can.
What with the tax implications that we’ve already mentioned for landlords, without a consistent stream of tenants and an area where you can charge high costs, the money just doesn’t match up with the staycation income.
But renting your property for holiday stays is not without its tax obligations. We wrote a guide to help with what you should consider when putting your property on Airbnb. Take a look here.
And, to top it all off, in the March 2024 Spring Statement, changes to Furnished Holiday Lets (FHLs) were announced. And it’s not looking too good for landlords. Here are the changes, live from April 2025:
Honestly, it would be to wait and see. More updates on many of the recent changes are required and with a new government in town, things are all over the place. But, one thing is for sure – take advantage of the tax reliefs and systems in place now, while you still can.
Don’t know what that could mean for you? Get in touch with our accredited accountants for a one-off, tax advice session. They can help you explore your options to make a tax-efficient choice that’s right for you.
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