New figures show that the UK tax rate on buy-to-let investments is already higher than in many other countries, even before Chancellor George Osborne planned assault on tax breaks.
The Chancellor's forthcoming tax crackdown may threaten the profitability of buy-to-let and drive some landlords out of the market.
Osborne claims to be trying to level the playing field between landlords and first-time buyers by cutting higher rate mortgage tax relief, but now it seems that landlords already face relatively high taxes.
A report in The Daily Telegraph claims that buy-to-let investors are already more harshly taxed than those in the US, Germany and France.
It said that most countries allow landlords to deduct mortgage interest costs in full and set any rental losses against their other income.
They can also secure capital gains tax discounts and claim depreciation against their properties.
The research was based on a study published by the London School of Economics in 2011 which compared the tax relief available to British landlords with those in other countries and concluded that Britain’s tax incentives for landlords fell behind those offered in other countries.
Research published by the Department for Communities and Local Government in November 2010 came to a similar conclusion.
This was well before Mr Osborne’s announcement that mortgage interest relief would be abolished.
Brokers have also condemned the rush to regulate the private rental market.
Kath Scanlon, research fellow at LSE London and co-author of the 2011 report, said the new buy-to-let tax “puts the UK out of step with how other countries are approaching the sector”.
“The one thing you can say about people with mortgages on buy-to-let properties is that they have made a conscious decision that they want to be in the business of being a landlord.
“Whereas people with no mortgages perhaps never made any such decision – some just happened to be saddled with a property they are renting out.
“The people who will leave the sector are likely to be at the more professional end of the small landlord spectrum and are probably not the ones who you would want to encourage to leave.”
Research suggests that the tax changes are more likely to harm tenants and investors