Landlords likely to raise rents following tax changes

Fresh research has indicated that a number of landlords plan to increase rents on the back of tax changes announced in the Budget. This is despite the Government insisting that changes to the way landlords are taxed will see rents stay largely even.

Rises

Earlier this month, the Chancellor announced that mortgage interest tax relief for landlords is to be capped at the basic rate of income tax. A report from the Residential Landlords Association indicates that 65% of landlords are considering rent rises as a direct result of these alterations.[1]

In addition, landlords will be stripped of their automatic entitlement to a wear and tear allowance for their homes, which will leave them with no funds in the event of generic problems.

HM Revenue and Customs has forecasted that the changes will have no impact on rent levels. Mr Osborne believes that landlords are taxed more favourably than home owners. However, the Institute for Fiscal Studies and Policy Exchange have warned that this is not correct, pointing out that unlike property owners, landlords are taxed on rental yields and capital gains.

Landlords likely to raise rents following tax changes

Reality

‘The reality is that the chancellor’s belief that rental property is taxed more favourably than home owners is simply not correct,’ said Alan Ward, chairman of the RLA. He believes that, ‘rather than supporting the sector to provide the vital homes needed to support a flexible labour market, today’s Finance Bill will choke off supply and drive up rents.’[1]

‘The belief that landlords should be compared to home owners is like comparing apples with pears. The two are vastly different. It’s time the Treasury recognised residential landlords as a business,’ Ward added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2015/7/landlords-considering-post-budget-rent-increases