"Communication is key in any landlord relationship, and this goes for the whole agency, including your management team who should make sure that not only are landlords up to date with rents but that they’re always getting the current rental rates for their property"
- Sally Lawson - Agent Rainmaker
Sally Lawson, Founder of Agent Rainmaker, is urging letting agents to do all they can to help as landlords across the country continue to suffer the repercussions of Section 24 five years on.
Sally explains: “The situation for landlords is pretty dire at the moment. Not only has the rise in mortgage rates led to landlords paying out considerably more each month, but the imposed legislation also means that a landlord is now essentially having to pay more tax on minimal profits!
“This is unsustainable and yet despite the industry appealing to the Government to reconsider, landlords remain in an untenable position and are subsequently having to make some really tough decisions.”
What is Section 24?
Back in 2015, then-Chancellor George Osbourne changed the rules on tax relief for buy-to-let mortgages -this is Section 24.
Since its introduction, all rental income made from a property is taxed. Landlords can claim back mortgage interest costs, however, this is only up to the basic income tax rate of 20%. The changes were rolled out in 2017 and came into full effect in April 2020.
Before the first stage of the tax changes in 2017, landlords could deduct all of their mortgage interest from their rental income and pay tax solely on their profits.
However, between April 2017 and April 2020, mortgage interest tax relief was gradually reduced and ultimately replaced with a 20% tax credit.
It’s estimated that over a third of a million landlords are on the brink of walking away from the private rental sector as they see selling up as their only viable solution. Worryingly, a report by finance firm Octane Capital states that this mass exodus could essentially wipe over £200bn from the industry in one fell swoop.
Landlords that do stay are being forced to put their rents up in order to covet their own rising costs. The Office for National Statistics recorded a 5.3% increase in the cost of private rents in the year up to July 2023 – the largest increase the ONS has seen since its inception. The result? Millions of families are having to find hundreds of extra pounds per month just to stay in their homes – all while in the midst of a cost-of-living crisis.
How can agents help?
Sally highlights the importance of communication and to understand their individual situations, including whether they have a mortgage on their property – as these will be the landlords most at risk.
Sally explains: “Communication is key in any landlord relationship, and this goes for the whole agency, including your management team who should make sure that not only are landlords up to date with rents but that they’re always getting the current rental rates for their property.
“And, if all else fails – as an agent you can support your landlords to find suitable investors for their properties which they can sell as a tenanted investment – getting the buyer to agree to using your managed services, and keeping the tenant in their home.
She concludes: “Essentially, without our landlords, we simply wouldn’t exist as an industry and so for the sake of everyone, we have to do all we can to support property owners navigate their way through this tumultuous time. And we need to do it now.”
