HMRC has issued the official property income statistics for 2020-21 which indicate a decline in the number of private landlords and highlight the high costs of financing buy to let properties.

The number of unincorporated landlords declaring rental income for 2020-21 dropped by around 50,000 compared to the previous year, whilst total income dropped by 11% (£5 billion) between 2016 and 2021 despite rising rental prices.

Finance costs made up 32% of total expenses claimed by landlords, a figure that will already have significantly gone up given that interest rates have increased by 1.5 % since April 2021, with many landlords already seeing their interest costs tripling in the last 18 months. Since April 2020 higher rate tax relief has not been available for Interest and other finance costs which has significantly increased the tax liabilities of unincorporated residential landlords.

Given this and, according to HMRC’s Capital Gains Tax statistics, a 50% increase in capital gains tax declared on residential property disposals in the 2021-22 tax year, we should expect these figures to continue to decline as more and more private landlords look to sell their rental properties whilst Stamp Duty Land Tax (SDLT) rates are low (this may be a temporary measure: as it was announced during the short-lived chancellor Kwasi Kwarteng's September's Mini-Budget) and before their mortgages become unaffordable and the bottom drops out of the property market.

According to data related in the Department of Levelling Up, Housing and Communities English Private Landlord Survey in May 2022, landlords are most likely to be individual investors, and only 13% of landlords are companies.

Which form of property ownership is likely to be most tax efficient for new landlords: Ownership in personal capacity or via a company?

There are currently two main tax reasons why landlords may be less inclined to buy property as individuals and would prefer a corporate ownership model:

  • Restriction on tax relief on interest
  • The onset of new tax reporting obligations, from April 2023 under Making Tax Digital for Income Tax.

Conversely, company landlords may be subject to higher rates of tax, depending on profits and whether they have associated companies, when the proposed Corporation Tax rate increase goes ahead in 2023, see the new Chancellor, Jeremy Hunt's October's Fiscal Statement.

Landlords may like the 

Useful guides on this topic

A landlord? Start here...
This freeview 'At a glance' guide is essential reading for landlords: our guides take you step-by-step through planning your business for tax purposes and complying with your different tax obligations during the life of your rental business.

Property profits & losses: Toolkit (2022-23)
Our Property profits & losses toolkit takes HMRC's version and adds a great deal more information about what you can claim as an individual.

Adviser's Guide: Property Business, profits and losses
What is property income? How is it taxed? How are profits calculated? How are losses relieved? Is NI paid on property income? Is property income classed as a business activity?

CGT: Reporting when & how?
How do you report your capital gains? What return do you use?

Mini-Budget 2022: Stamp Duty Land Tax
Changes to thresholds all take place at midnight on 23 September 2022

External link

HMRC Property rental income statistics: 2022 

Department of Levelling Up, Housing and Communities English Private Landlord Survey 2022

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