Wylie & Bisset tells landlords that selling up not the only option as property tax changes bite

Catherine McManus

HMRC has revealed that the Capital Gains Tax take reached a record £9.2bn in the last financial year, up from £7.8bn in the previous 12 months, with analysts predicting much of that rise is attributed to changes to property taxes in the past two years that have led many buy-to-let landlords to sell assets.

Catherine McManus, head of tax at Wylie & Bisset, pointed out that buy-to-let landlords are in their third year of the phasing out of mortgage interest relief and that in the current fiscal year (2019/20) taxpayers only have 25 per cent of their interest payments directly deductible from rental income, with the remaining 75% eligible for a 20% tax credit.

And as we move into the 2020/21 tax year, there will be no direct deduction of mortgage interest relief. As a result, higher rate taxpayers are experiencing a continued reduction in their take-home income.

“The increase tax take in CGT could be an indication that some buy-to-let landlords are selling their properties in a bid to seek alternative investment solutions, perhaps with more competitive rates of return that will increase their take-home income,” she said.

“If that’s the case, we would advise landlords that selling their buy-to-let portfolio is not their only option. Alternatively, a restructure of the holdings or a wider income tax planning review could prove more beneficial.”