The cuts to Private Residence Relief (PRR) are likely to hit accidental or consumer landlords harder than those in the portfolio space, but may be a good thing for the private rental sector.
HM Treasury launched its consultation into the cuts yesterday and is planning to cut the lettings relief portion to only those who share occupation of their house with a tenant.
Brokers criticised the changes as another attack on landlords and questioned whether it would stop more coming into the market.
Penalised by slow market
The Buy to Let Business founder and chief executive Ying Tan (pictured) told Specialist Lending Solutions: “The cutting of the lettings relief element of PRR is another attack on the landlord community following a raft of other measures introduced over the last few years.”
He also noted that it would impact the accidental landlords in particular who have struggled to sell their property in a slow housing market.
“By reducing the relief, it will increase the capital gains tax (CGT), however CGT is only payable when you sell the property and therefore it will discourage landlords to sell. This is good for the buy to let market, giving more choice for renters.
“However, it could be argued that it contradicts the notion of ‘levelling the playing field’ as property stays in the ownership of landlords and not first-time buyers. As always, landlords will evolve and adapt to the changes in the environment.”
Another barrier to entry
The greater impact on commercial landlords rather than portfolio landlords was echoed by TBMC managing director Jane Simpson.
However, she suggested it might be another barrier preventing new landlords coming into the market.
“This is in my opinion unlikely to have a significant impact on portfolio landlords as the relief only applies to gains made on property that is or has been the landlord’s main residence,” she said.
“It is much more likely to impact consumer landlords where the landlord chooses to sell and might previously have benefited from the relief on gains made on the sale of a property that had previously been their main residence.
“In the majority of cases, professional landlords will not have lived in the properties that they are acquiring or that are already in their portfolio and so will not be impacted by this change. This could be another reason however why we see less ‘accidental landlords’ coming into the market,” she added.
Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.