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Modelling the impact of taxation reform on the PRS

Significant policy changes affecting the private rented sector have the potential for a serious impact on the centre as the majority of landlords face increased taxation. The Residential Landlords Association commissioned research to develop an economic model of the finances of PRS landlords and property investors in order to identify the wider impact of the recent taxation reforms.

The rapid growth of the private rented sector in England has increased the supply of rented housing but is perceived by the government to have come at the expense of would-be first time buyers. Consequently, the government introduced taxation reforms in order to increase the burden of taxation of private landlords, including removing the 10% fixed wear and tear allowance, increasing Stamp Duty by 3% of the sale price for purchase of buy to let and second homes, allowing mortgage interest to be offset only against basic rate tax, and most recently changes to Capital Gains Tax.

Recent research published by the Council for Mortgage Lenders suggested that the majority of landlords would be unaffected by the reforms, whereas RLA research findings found that the majority of landlords reported concerns that they would be negatively affected by the changes.

CCHPR were therefore commissioned by the RLA to investigate the economic impact of government taxation reform on the private rented sector.  A finance-focused survey of landlords provided the basis for modelling the impact of recent changes and possible changes to taxation on landlord finances.

Our research explored the contribution of landlords to providing housing and the wider economy, promoting new policy suggestions on the taxation of this sector of the housing market to support the RLA’s campaigning work.

 

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Project Start Date

December 2017