What have UK landlords seen lately?

Throughout 2022, landlords continued to take a hammering in terms of increasing regulation and legislation combined with the full force of the onerous Section 24 regime.

A petition to reinstate mortgage tax relief to be offset against rental income has topped 20K signatures and counting.


Then, added into the mix, were the multiple Bank of England interest rate rises, which would have significantly impacted the cash flow of landlords on a standard variable or tracker rate mortgage.

The bottom line is that landlord margins continued to be squeezed into 2023, and, in some cases, the pips are squeaking!

However, when asked in a recent Octane Capital survey as to which legislation landlords would like to see reversed, it wasn’t the dreaded Section 24 - the recent changes to capital gains tax allowance ranked top.

The government plans to reduce the CGT tax-free allowance from £12,300 to £6,000 in April of this year, implementing a further reduction to just £3,000 by 2024.

What do the experts say?

With so many pressures on cash flow, it’s clear that many landlords are looking to sell up, but, if they want to beat the tax deadline, they need to get their skates on before the tax free allowance is reduced!

Michael Wright of Rental Income Tax Advisors gave us some insights into why landlords are concerned about this reduction in CGT tax free allowance:

“At present, the tax free allowance for the purposes of CGT is £12,300, which will reduce to £6,000 in the 2023.24 tax year, and reduce again to £3,000 in the 2024.25 tax year. Put simply, for a higher-rate taxpayer landlord selling a residential property (with a full annual exemption available), generating a chargeable gain of £20,000, would currently attract a CGT bill of £2,156. But were this gain to occur in 2023.24, the CGT bill would be £3,920 and in 2024.25 it would be £4,760.

So, in this simple example, it shows how significant these changes will be. In view of this, those landlords who may have been impacted by Section 24 might view this as the final straw, and a reason to cash in now”.

Landlords can only benefit from the tax free allowance once per annum, so most landlords decide to sell up one property per year, so they can benefit.

However, with rising interest rates combined with rising costs of being a landlord and falling property prices, negative cash flow is not the only issue they need to consider. Negative equity could also rear its ugly head again.

In most cases it will be highly leveraged landlords who suffer the most pain and who are the most at risk of market conditions. They will not be able to re-mortgage to fixed rates and are at the mercy of the Bank of England who are predicted to enact further interest rate rises. Most pundits and commentators are predicting the base rate will rise to 4.5%. At the time of writing, it is at 3.5%.

If a property is in cash neutral or negative cash flow, then a landlord may have to consider that it is no longer viable, especially as there are also concerns from lettings agents that rent arrears are going to increase over 2023 due to the cost of living crisis impacting tenant affordability.

68 per cent of respondents to a survey in late 2022 reported that they were seeing arrears increasing - and one in 12 agents predict arrears will actually double.

Tim Clark, chairman of UKALA, says the forecast is unsurprising.

“The economic situation in the UK is, as we know, going to be difficult next year and this will clearly impact on rents, due to rising costs for landlords, and increased tenant arrears due to affordability” he says.

So there are many indicators that landlords with under-performing properties should consider selling them as one poorly performing property could bring down an entire portfolio.

Director of LandlordBuyer Jason Harris-Cohen commented:

“It’s really interesting that the reduction of the capital gains allowance is at the forefront of landlord’s minds. It suggests that many of them are contemplating selling up and are concerned that their GCT tax bill is going to rise significantly going forwards.

The current economic challenges may force landlords to sell up earlier than expected, but it’s almost as if the government are creating a “lock in” to deter landlords from exiting the sector.. It seems whichever way landlords turn, they are caught between a rock and a hard place”.

Fortunately, LandlordBuyer is on hand to assist landlords who need to sell quickly. Our family-run business is a genuine cash buyer and that means a swift transaction for landlords who need to exit a property that is draining them financially.

Landlords on TrustPilot describe our service as “quick”, “low hassle”, and “stress free”.

Being a genuine chain free cash buyer we can complete in as little as 10 days from having our offer accepted.

We will buy any property in England and Wales, with tenants in situ, in any condition.

Selling to us as a cash buyer with tenants in situ means no estate agent fees, no voids while waiting to sell, the tenants can remain in their home, and we can complete quickly to take away the anxiety of having a property that has become a financial drain.

Additionally, our own research indicates that between 1st January and 17th March 2022, almost 54,000 property sales fell through, while a third of sales failed to reach completion. Landlords are not immune. When they use the open market to sell, they are at the mercy of changing conditions, especially if they find a lengthy chain below them.

Sales abort for many reasons but in today’s market, we are seeing more buyers withdraw because they are unable to secure a mortgage or they find themselves financially overcommitted as living costs rise. Even sellers further down the chain can scupper a sale, especially if they fail to achieve an over-ambitious asking price in a cooling market.

This means that, if your sale falls through, and you have to re-market your property, you could miss the CGT deadline.

One thing is certain: Landlords need to have a full understanding of their cashflow and equity position and, if they are on tracker or SVRs, they should use financial profiling tools to stress test their property to see if it can survive further interest rate rises.

LandlordBuyer offers a “no obligation” offer within 48 hours of receipt of your enquiry. In some cases, we will not even need to visit your property, so you have nothing to lose by making an enquiry with us. Our chain free cash buying service could solve your problem and allow you to maximise the current GCT allowance.

Get in touch today!

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