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Home News Buy-to-let

Landlords hike rents in response to buy-to-let tax changes

by Stephen Little
September 28, 2017
Mind the gap: London and South East skew average price by record £89,000
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to let signsThe number of letting agents reporting an increase in rent costs hit a two-year high in August, according to the Association of Residential Letting Agents.

The figures revealed that 35% of letting agents saw landlords increasing rents in August – the highest level since July 2015.

This compares to just 2% of tenants who successfully managed to negotiate a rent reduction.

The data suggests that the raft of regulation changes that have hit the buy-to-let sector in the past 18 months are finally filtering through, with landlords passing on rising costs to tenants.

The number of properties managed per branch fell marginally in August to 189 – down from 192 in July.

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David Cox, ARLA Propertymark chief executive, said: “This month’s findings paint another bleak picture for tenants.

“In November last year, only 16% of agents saw landlords increasing rent costs, but that figure now stands at 35% – which is likely to continue rising. Landlords have had a rough ride at the hands of policy changes at government level, and it’s becoming clear that these additional costs are now being passed onto tenants.”

Mortgage interest relief for residential buy-to-let properties is being reduced to the base income tax rate, which is 20%.

The changes mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.

The new rules are being phased in over a four-year period. Landlords will still be able to deduct 75% of costs from rental income in the current tax year. In the 2018/19 tax year it will drop to 50% and then to 25% in 2019/20. After this landlords will only be able to claim a 20% tax credit on mortgage interest.

Property investors looking to buy a second home have also been hit by a 3% stamp duty surcharge as part of the Government’s plans to curb the buy-to-let market and free up property for first-time buyers.

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Tags: mortgage tax reliefstamp duty
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Comments 1

  1. Daniel Latto says:
    8 years ago

    We keep telling the government, but they refuse to listen.

    So rent increases will be the norm.

    Section 24 hasn’t even hit properly yet – wait until the tax returns go in next year, and we’ll see rents go skyward as the reality hits the landlords bank balance.

    In Ireland rents rose 50% when they tried this. Shocking news for tenants when finances are already tight.

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