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The aim of this research was to investigate the impact of taxation reform on the private rented sector, in the light of emerging evidence on how landlords have responded thus far.

The research involved a survey of landlords in March and April 2018, asking questions about landlords’ personal finances, portfolio and property management and survey responses were then used to model the impact of reform of different tax policies:

In November 2015, the government announced its intention to impose an additional rate of Stamp Duty Land Tax (SDLT) at 3% for the purchase of additional residential properties from 1st April 2016. The analysis suggests that landlords brought forward their buying activities in anticipation of the increase in SDLT, with a significant increase in the number of landlords buying properties, and in the number of properties bought in 2015/16.

However, the analysis also showed that the number of properties purchased and the number of landlords buying properties fell in 2016/17 and 2017/18 after the introduction of the additional 3% rate of SDLT. In 2017/18, the number of properties purchased had fallen to 62% of the average number bought in the two years of 2013/14 and 2014/15, and the number of landlords buying properties had fallen to 65% of the number active in 2013/14 and 2014/15.

Over the four years from 1st April 2017 to 1st April 2020, the amount of Income Tax relief available on finance costs for let residential property will be progressively reduced to the basic rate of tax. The analysis shows that 53% of landlords would be affected by 2020/21.

Just under 38% of landlords would lose over £1000 in tax relief by 2020/21. However, the largest impact will be felt among landlords losing over £3,000 in tax relief: while only 5% of landlords will lose over £3,000 in tax relief in the first year, this will rise to 23% of all landlords by 2020/21.

The findings suggest that landlords with one property are unlikely to sell in the next year, but landlords who will lose over £1,000 in tax relief by 2020/21 are more likely to sell a property in the next year.

The change to mortgage interest tax relief was the single most dominant reason for landlords deciding to sell property.

The report can be downloaded below or from the RLA's website.