Over 1.9 million people received an income from property in 2015-16, with the number of new landlords increasing on average by over 100,000 every year since 2011-12, according to analysis of official statistics by NFU Mutual.
The total net income from property hit £16.2bn in 2015-16, an increase of £4.1bn over four years.
The annual Personal Incomes Statistics, published by HMRC, also shows total income from dividends almost doubled over the same period from £42.5bn to £83.8bn as average incomes soared to £17,000 per investor.
Sean McCann, chartered financial planner at NFU Mutual, said: “The Chancellor will be rubbing his hands in anticipation as these huge incomes from dividends and properties give the taxman two bites at the cherry.
“It’s not just the income that will be taxed. The latest predictions from the Office for Budget Responsibility show capital gains tax receipts will rocket from £8.8bn this tax year to £9.9bn in 2018-19 and £13.3bn in five years’ time. So they clearly expect many investors to sell up and realise their gains between now and 2022-23.”
Capital gains tax can be charged when assets and investments are sold or given away. For most assets such as shares, gains are taxed at 10% or 20%. Anyone selling a property that isn’t their main residence will pay 18% or 28%, depending on the size of the gain and their other income.
McCann added: “It’s likely we’ll see the number of landlords start to plateau or even fall over the next few years as property investors start to feel the pinch from a series of tax measures that have already come into force. And if more people sell their investment properties and shares, there are likely to be more tax charges to pay.”
“Many of our customers work in partnership with their spouse or civil partner to reduce their combined tax bills, taking advantage of each individual’s income tax and CGT allowances by transferring shares and property between them. It often makes sense to transfer income producing assets to a spouse or civil partner if they pay a lower rate of income tax.
“However we’ve been warning our customers to watch out for potential tax traps. In some circumstances, transferring property between spouses could trigger a stamp duty charge. Any transfer of assets to someone you aren’t married to could do the same.”