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Warning of higher rents as a result of budget measure

Sally Walmsley
Written by Sally Walmsley

The Government’s impact assessment of budget measures to restrict mortgage interest relief to the basic rate for landlords is being questioned by the Residential Landlords Association and the Scottish Association of Landlords…

The Government’s impact assessment of budget measures to restrict mortgage interest relief to the basic rate for landlords is being questioned by the Residential Landlords Association and the Scottish Association of Landlords.

The measures announced in today’s budget create damaging uncertainty for the private rented sector and will leave tenants facing increased rents, claim the landlords’ representatives.

HM Revenue and Customs’ impact assessment refers to the proportion of individual landlords that will receive less relief as a result of this measure. This misses the point that it is not the landlords but the number of properties affected that matters most. According to HMRC 20 per cent of landlords will be affected but many of these, if not most, will have more than one property with an interest charge against each.

The RLA and SAL are pointing to an assessment by PWC which has warned that the measure: “could see buy-to-let investors feeling the squeeze and putting up rents”, which, it notes, “would have a major impact” on tenants.

Commenting following the Chancellor’s statement, RLA Chairman, Alan Ward said:

“The RLA will look in detail at the Government’s measures, but on the face of it the impact could be to push up rents as landlords have to recover their extra costs.

“With many contradicting assessments of the number of private rented properties and the number of landlords, HMRC’s impact assessment is scant on detail. The reality is that this measure will hit many more tenants than landlords.

“We urge the Government to hit the pause button on these proposals and undertake a comprehensive and open consultation and assessment of what its measures will mean.”

Further Information

“Today’s changes do nothing to address the fundamental lack of supply in the UK housing market and ultimately may backfire and hit people who are having to rent.

“We could see buy-to-let investors feeling the squeeze and putting up rents. This would have a major impact on Generation Rent.

“Moreover, if interest rates increase over the coming years, and rental yields don’t keep pace, investors could be paying tax on a loss.”

Full details at http://pwc.blogs.com/press_room/2015/07/budget-pwc-comments-on-impact-of-interest-relief-withdrawals-on-buy-to-let-property-.html .

Read RLA Policy Director Richard Jones’  submission to the Treasury regarding tax relief being vital to the PRS.

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About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Communications Manager for the RLA and Editor of RPI magazine. With 16 years’ experience writing for regional and national newspapers and magazines she is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and editorial content for our media partners.

She issues press releases promoting the work of the RLA and its policies and campaigns to the regional and national media and works alongside the marketing team on the association’s social media channels to build support for the RLA and its work.

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  • Can one of the readers set out an example with assumed rent etc in order that I could see how will it work in practise .

  • Please don’t forget to include in your advocacy to government the proposed abolition of the wear and tear allowance which will affect all landlords. I can’t deny it: the allowance is generous, but abolition at the same time as the changes to tax relief is a massive double blow and simply adds to the likelihood of rising rents and future under-supply in low yield areas like London. There are many other allowances across the tax sector that could be seen as generous – including various extra-statutory vat concessions. Why only special treatment for the landlords?

    The allowance is also advantageous for other reasons. Administrative simplicity; predictability and ease of policing by HMRC. If thought too generous in current form, at least consider cutting back to 5% of nett rents rather than complete abolition.

  • This is an an appalling proposal and will increase rents. So for many renters they will see costs go up as supply of rental stock will go down because taxing losses is unsustainable. It is insulting to landlords to not have thier industry taken seriously. Altering the playing field so fundamentally like this will have extreme consequences for those that what.

  • I have done my own rough calculation and concluded my tax bill will DOUBLE as a result of these tax changes. The reason for the huge increase is that the abolition of wear and tear will propel me much higher into the higher rate of tax. When it is then combined with no longer being able to deduct mortgage interest at the higher rate, the two changes combined, have a kind of multiplier effect, causing a huge rise in my tax bill.

    Let’s face it: as a political force, landlords have been pretty useless and we are being walked all over as a result. Every landlord needs to write to their MP. It’s not only about the changes which have been proposed so far. It’s also about all those additional unknowns that we may be clobbered with in future years.

  • There has been a lot of talk about landlords putting the rents up, however this will not happen initially, many landlords will start to sell their housing stock one by one, this could lead to a glut of houses coming onto the market, thereby decreasing the values for everyone, homeowners as well, however mortgages are not easily available to first time buyers and after the budget less accessible to buy to let buyers as well.
    As landlords sell up there will be less housing stock available for those renting, and after landlords sell, less rental stock overall then yes rental prices will increase.
    I cant think why these new changes have been made in the budget, unless it is to endorse public opinion, however it is undoubtitly ill thought through -where is the replacement housing stock.?

  • I ‘m about to sign a new tenant and have already warned him that due to these changes the rent will have to rise in a year. Whereas before I would have been happy to guarantee the same rent while my mortgage is fixed (currently 5 years) I now no longer feel I can offer that security. And the government is complaining that landlords are to blame for tenants’ lack of certainty? It’s really counterproductive..

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