UHY Hacker Young said that BTL properties have become notably less profitable for many landlords in recent years as they have faced surging mortgage rates
Landlords continue to exit the UK property market with the sale of another 151,000 BTL and holiday homes in the year to April 5 2023, according to national accountancy group UHY Hacker Young.
The group said that BTL properties have become strikingly less profitable for many landlords in recent years as they have faced surging mortgage rates.
The average 5-year fixed-term BTL mortgage rate was just 1.72 per cent at the end of 2021. This increased to 5.55 per cent at the end of September this year.
Landlords could earlier deduct mortgage interest and other finance costs from the rental income from that property to reduce their income tax.
Nevertheless, after a rule change in 2017, the amount landlords could deduct from their rental income gradually reduced until it was fully replaced by the ability for landlords to lower their tax by 20 per cent on mortgage interest payments.
This change has become particularly painful for landlords in the last two years as mortgage interest costs have risen sharply.
Neela Chauhan, tax partner at UHY Hacker Young, said: The rise in interest rates has hit UK landlords incredibly hard. Many are questioning whether they can continue in the market – and some have already quit altogether.
The rise in mortgage costs is not the only issue for landlords – they have been hit hard from all sides in recent years. Tax changes have made it much harder for BTL investors. Ultimately, it is renters that will feel the pain from that as the number of properties available drops.
As per HMRC, £1.8 billion in CGT was paid on sales of BTL properties from April 6 2022 to April 5 2023.