The Prosperous Landscape of Property Income in the UK

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Income Up 10% Amidst Growing Landlords

In the 2021/2022 tax year, the property income landscape in the United Kingdom soared to new heights, with income up 10% amidst growing landlords, reaching an impressive £48.87 billion. This surge was propelled by escalating rents and an expanding community of investors. A recently released report from HMRC meticulously dissects the property income of the average investor for the specified tax year, drawing comparisons with preceding years to unravel evolving trends and patterns. This analysis focuses specifically on unincorporated landlords—those who do not operate through a limited company.

Recovery and Growth

During the scrutinized period, a substantial 2.82 million landlords declared property income from rental payments. The research underscores a resounding recovery across all metrics, reinstating figures to pre-Covid levels. Notably, there was a notable 10% uptick in property income over the five-year span from 2017/2018 to 2021/2022, surging from a combined total of £46.37 billion to the recent £48.87 billion.

While rents have ascended over this period, especially in recent years, there is a noteworthy revelation. The concurrent increase in the number of individuals reporting property income to HMRC for tax purposes is significant. This implies a cumulative rise in the overall count of landlords in the market.

Examining landlords’ earnings, HMRC’s figures capture declared rental income and associated expenses during the tax assessment. To determine actual profits, a meticulous examination of income against expenditures is imperative. This includes non-deductible mortgage costs, agency fees, or renovation work. The data indicates the average investor’s annual property income from rent remained relatively stable. It oscillated from £16,300 in 2017/2018 to £17,300 in 2021/2023 over the five-year trajectory.

Income Up 10% Amidst Growing Landlords: Tax Expense Claims

The research discloses that 89% of unincorporated landlords claimed some form of tax expenses. Notable claims during the 2021/2022 tax year included £6.85 billion for finance costs, £5.50 billion for repairs and expenses, and £3.4 billion for legal, management, and professional fees. The aggregate sum of claims has shown an upward trend in recent years, indicating the escalating costs associated with landlord responsibilities. On average, landlords filed claims of £9,400 in expenses against their property income in 2021/2022.

In the 2021/2022 period, London and the South East led in property income regionally. This is unsurprising, given their status as the most expensive and densely populated rental markets. Following closely were the East of England and the South West. Notably, the North West secured the fourth-highest earner position and ranked fifth in the number of unincorporated landlords reporting property income during the tax year.

Expense Trends Across Regions

Patterns in expenses claims mirrored the income trends, with the top five regions for expenses being London, the South East, East of England, the South West, and the North West. Conversely, the North East exhibited the lowest figures in property income, landlord numbers, and expenses claims.

Despite consistently higher mortgage rates in the UK over the last two years, landlords and property investors are now witnessing a shift. Rates have begun to decline in recent months, offering a reprieve to those contemplating remortgaging.

Income Up 10% Amidst Growing Landlords: Strategic Considerations

Before venturing into property investment, ensure a comprehensive assessment of all costs and expenses. This evaluation should be made against potential earnings from rental income or future property sales. Acknowledge that both the property market and the mortgage sector are subject to constant flux, with income up 10% amidst growing landlords. This necessitates a long-term perspective for informed decision-making. Staying abreast of these trends is paramount as the economic landscape continues to evolve. Moreover, especially for those navigating the dynamic terrain of property investment in the UK.

Find out more about what’s happening in the property market in our News column.

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