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Tax reforms are starting to have an impact on the property investment market, with the estimated number of landlords in the private rental sector falling to a seven-year low
There were 2.66m private landlords in Britain in 2019, which is 222,570 fewer than 2017’s peak of 2.88m, and the lowest level since 2012 when the total was 2.58m, according to research from estate agency chain Hamptons International.
Hamptons International’s research suggests individuals who let a single property are pulling out, while landlords with larger portfolios are increasing in number. Whereas ten years ago only 15% of landlords owned multiple home, now the proportion has doubled to 30%.
Landlords in the North East of England were found to have the biggest portfolios, at 2.05 homes on average, followed by those based in Yorkshire and the Humber (2.03) and London (2.01).
The average landlord owned 1.93 buy-to-let properties last year, the highest number since 2009.
The research also indicated that the proportion of homes let by overseas based landlords is on the rise. During the first 10 months of 2019 international investors accounted for 11% of homes let in Great Britain, up from 7% in 2018.
This represents the first year-on-year increase since 2010 when 14% of homes were let by non-UK based landlords.
Tax and regulatory changes have caused some landlords to sell up and leave the sector. HMRC is also tightening up the rules for overseas landlords.
HMRC has published guidance to changes in the regulations for non-UK resident company landlords that have an amount on account of tax withheld from rents collected on their behalf by agents, and agents who pay financing costs or who direct others to pay financing costs on behalf of a non-UK resident company landlord.
Finance Act 2019 enacted rules whereby non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged corporation tax on their property income, rather than income tax as previously.
As a consequence, they will be subject to the corporate interest restriction rules at Part 10 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) on the deductibility of financing costs.
Some of these non-UK resident company landlords have an amount withheld on account of tax from their rents under the non-residents landlord scheme.
The change HMRC is now outlining amends the regulations which govern the non-residents landlord scheme.
It introduces a rule, subject to an irrevocable election, to enable an agent, being a prescribed person under the non-residents landlord scheme, who has paid out financing costs (or has directed others to pay out financing costs) on behalf of the non-UK resident company landlord to apply an alternative to corporate interest restriction as set out at Part 10 of Taxation (International and Other Provisions) Act TIOPA 2010.
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