Propertymark urges tax review to differentiate buy-to-let and large investors

Propertymark urges tax review to differentiate buy-to-let and large investors

Propertymark has called on the UK Government to conduct a comprehensive review of property taxation, focusing on the cumulative tax burden on private landlords and the distinctions between individual buy-to-let investors and large corporate landlords.

Propertymark has made an urgent appeal ahead of the upcoming Autumn Budget for a thorough assessment of the tax system affecting property owners, particularly private landlords. The trade body highlighted the increasing complexity and cumulative costs resulting from successive tax changes, including restrictions on mortgage interest tax relief, higher Stamp Duty Land Tax (SDLT) surcharges on additional properties, and other expenses related to property maintenance and improvement.

The organisation emphasised that these factors influence landlords’ decisions to enter, remain in, or exit the rental market, impacting the supply and choice of homes for tenants. Propertymark advocates for a stable and proportionate tax framework that would foster landlord confidence and support investment in the private rented sector.

Calls for differentiated tax treatment and market-supporting measures

Propertymark’s statement urges the Government to consider differences between individual landlords and corporate investors in the tax system. This includes reviewing Income Tax, mortgage interest relief, Capital Gains Tax, and additional-property Stamp Duty charges. The aim is to ensure that tax policies do not disproportionately burden small-scale landlords compared to larger investors, which could affect the diversity and availability of rental properties.

Stamp Duty Land Tax was also highlighted as a significant upfront cost that may deter property transactions, including downsizing or moving to more suitable homes. Propertymark suggests reviewing SDLT rates and thresholds to ensure they reflect current wage levels and house prices. The trade body welcomed the Your First Home scheme, which offers low deposit options on new-build properties, but stressed that support should also extend to buyers of existing homes to stimulate market activity.

Additionally, Propertymark raised concerns about the proposed High Value Council Tax Surcharge, set to affect residential properties valued over £2 million in England. The organisation called for consideration of regional disparities and household incomes to avoid unintended consequences on property owners and renters.

Energy efficiency and housing support require practical financial backing

On the topic of energy efficiency, Propertymark supports improving the UK’s housing stock but insists that targets must be realistic and accompanied by practical financial support. Retrofitting older properties can involve substantial upfront costs, and the trade body recommends restoring and expanding tax incentives such as the Landlord’s Energy Saving Allowance and considering VAT relief on eligible works. Clear guidance on available grants and loans is also needed to help landlords plan improvements without undermining rental supply.

Propertymark also reiterated its call for Local Housing Allowance (LHA) rates to cover at least the cheapest 30% of local market rents, with an annual uprating guarantee. When housing support lags behind rent levels, lower-income tenants face increased financial strain and reduced housing options. Aligning LHA rates with local market conditions would assist tenants in meeting housing costs and maintaining access to private rented accommodation.

Context and implications for landlords and letting agents

The call for a comprehensive tax review comes amid ongoing concerns about the sustainability of the private rented sector. Successive tax changes over recent years have increased the financial pressures on landlords, particularly smaller-scale buy-to-let investors who may lack the resources of larger corporate landlords. This disparity can influence investment decisions, potentially reducing the availability of rental properties and affecting housing affordability.

Stamp Duty surcharges and restrictions on mortgage interest relief have been particularly contentious, as they raise the upfront and ongoing costs of property investment. Propertymark’s emphasis on reviewing these measures in combination rather than isolation reflects a broader industry concern that piecemeal tax changes can have unintended cumulative effects.

Energy efficiency regulations and the need for landlords to upgrade properties to meet standards add another layer of financial challenge. Without adequate incentives and support, landlords may be reluctant or unable to invest in necessary improvements, which could impact property standards and compliance.

Practical effects and considerations for landlords

For landlords managing small portfolios, the prospect of a differentiated tax system could bring some relief if it results in lower tax burdens compared to large-scale investors. However, the details of any reform will be critical. Landlords should monitor developments closely, as changes to mortgage interest relief, Capital Gains Tax, and Stamp Duty could affect profitability and investment strategies.

Letting agents may also see changes in landlord behaviour, with potential shifts in market participation or property availability. Agents should prepare to advise clients on any new tax rules and support compliance with evolving energy efficiency requirements.

Energy efficiency funding and incentives will be particularly relevant for landlords with older properties. Access to tax reliefs or grants could influence decisions on retrofitting and property improvements, affecting both compliance and tenant satisfaction.

Uncertainties and what to watch

The scope and timing of the proposed comprehensive tax review remain uncertain. Propertymark has called for clear terms of reference, meaningful sector engagement, and a published timetable, but no official government response or commitment has been announced yet. Landlords and agents should watch for announcements around the Autumn Budget and subsequent consultations.

The interaction between different tax measures, such as SDLT, Capital Gains Tax, and the High Value Council Tax Surcharge, will also require careful scrutiny. Regional variations in property values and incomes may complicate the impact of new taxes or surcharges, potentially leading to uneven effects across the country.

Energy efficiency policies and financial support mechanisms are evolving, and landlords should stay informed about available incentives and compliance deadlines to avoid penalties and maximise benefits.

What landlords should consider now

• Review current tax liabilities and how changes might affect your portfolio, particularly regarding mortgage interest relief and Stamp Duty.
• Assess the energy efficiency of your properties and explore available grants, tax reliefs, or funding options for improvements.
• Keep abreast of government announcements related to property taxation and energy efficiency, especially around the Autumn Budget.
• Maintain clear records of investments, improvements, and tax filings to support compliance and future planning.
• Engage with professional bodies and industry updates to understand potential reforms and their implications.

Supporting landlords with compliance and organisation

TLA membership offers landlords and letting agents access to up-to-date compliance resources and practical information on taxation and property management. Our new property management and compliance platform, ORBIT, currently in BETA testing, is designed to help members organise their rental portfolios efficiently. ORBIT enables users to manage rental documents, track property improvements, and keep records of key compliance actions, including tax-related documentation and energy efficiency measures.

Access to TLA’s member compliance support can assist landlords in preparing for potential tax changes and monitoring regulatory developments. ORBIT’s features, such as recording repairs and inspections, can help maintain evidence of compliance and support decision-making in light of evolving tax and energy policies.

Explore TLA membership and learn more about ORBIT BETA access to stay informed and organised as the property tax landscape develops.

The upcoming Autumn Budget will be a critical moment for landlords and agents, with the potential for significant changes in property taxation. Staying informed and prepared will be essential to navigate these developments effectively.

Sources: Landlord Today