Agents have expressed their anger at the latest tax onslaught for the private rental sector.
Yesterday’s Budget saw the announcement that there were be an extra 2% added to income tax from property revenue next spring – this would be on top of the 2% rise first announced a year ago.
Olivia McSweeney, senior lettings director at UK Sotheby’s International Realty, comments: “Landlords are already being hit from every direction, and the Chancellor has just given them another reason to leave the market.
“With a further 2% rise in tax on rental income announced at the Budget, on top of the 2% increase already planned for next year, landlords are facing a four-percentage-point jump without any attempt to phase it in. That’s a lot to swallow in one go, particularly alongside the raft of regulatory reforms already coming their way.
“For many smaller landlords, this could be the final straw. They’ll look at the mounting costs, shrinking returns and growing responsibilities and simply decide it isn’t worth the trouble.”
Paul Shamplina, founder of Landlord Action, adds: “I really do wonder how much more the government thinks private landlords can take.
“Last year we had a two percentage point increase in tax on rental income announced, and now we are being told there is another two per cent on top of that. At what point does someone stop and ask what this is actually going to do to the rental market?
“I am speaking to landlords every single day, and far too many are already questioning whether it is worth staying in the sector. They have got rising costs, more regulation, the changes brought in by the Renters’ Rights Act, and now another tax increase to contend with.
“Of course, landlords should pay their fair share of tax, but there has to be a balance.”
Heather Powell, partner at Blick Rothenberg, warns: “2% on rental income really is the final nail in the coffin for private investors in rental properties – tax rates of 24%, 44% and 49% – and a deduction for interest that is restricted to the basic rate will mean that landlords will be looking to sell up and invest their money elsewhere.
“Tenants looking for good homes to rent will find reduced supply, and thus higher rents due to competition, and will be driven into the arms of corporate build-to-rent investors.”
Greg Tsuman, lettings managing director for the Martyn Gerrard agency, says: “Adding a further two per cent tax to property income on top of the previously announced two per cent is a surprising and incomprehensible decision. Last year’s Autumn Budget dealt a severe blow to the sector, but it looks like the Government wants to finish it off.
“The OBR was already warning that the level of tax being imposed on landlords was likely to drive up rents and reduce rental property supply. This is lunacy and I fear that the Government is actively trying to dismantle the PRS. At this point, the government may as well criminalise renting out a property.
“Landlords have endured successive measures against them for years and we’re already seeing an unprecedented exodus from the rental market. There was a desperate need to reassure and provide confidence. Instead, we’ll see the rush to the door intensifying. The property market is already struggling with the oversupply of rental properties being sold and we’re going to see even more downwards pressure on house prices as a result of this.
“With most renters not in a position to buy in this economic climate, we’ll just see more empty homes and increased rents. As the Government tries to end homelessness, it couldn’t have picked a better way to cause it to surge. If the previous Budget shot themselves in the foot, this one could be to the head.”
Dominic Agace, chief executive of Winkworth, comments: “The additional 2% burden on landlords from April is another disincentive to invest, particularly when many are already facing increased costs and regulation through the Renters’ Rights Act. As more households remain in the rental sector due market uncertainty, measures that discourage investment only make this worse.”
