A study has confirmed the belief that the Government’s tax relief changes for landlords will cause investors to increase their rents.
In the July Budget, Chancellor George Osborne announced that mortgage interest tax relief for landlords would be cut to the basic rate of tax, currently 20%.
Furthermore, the wear and tear allowance is being changed so that it is no longer automatically granted at 10% of annual rental income, but on actual expenditure.
The survey by the Residential Landlords Association (RLA) reveals that 65% of landlords are planning to raise rents as a result of these changes.
The findings challenge HM Revenue & Customs’ (HMRC) view that these measures will have no significant impact on rent prices.
The RLA argues against Osborne’s claims that landlords are taxed more favourably than homeowners.
The RLA says that the Institute for Fiscal Studies (IFS) and the Policy Exchange have stated that this is incorrect. Unlike homeowners, landlords are taxed on rental income and capital gains.
Chairman of the RLA, Alan Ward, says: “The reality is that the Chancellor’s belief that rental property is taxed more favourably than homeowners is simply not correct.
“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