Rents may rise up to 30% after tax change
Tenants in Britain’s private rental sector could soon be up against potential rent rises of up to 30 per cent due to recent tax changes.
According to Imperial College London, updates including the three per cent extra stamp duty on additional properties could mean people will soon be paying more for their rented home.
David Miles, professor of financial economics at Imperial College London, believes the new changes should be abandoned, explaining that they do not represent the move towards neutrality that they intended.
Mr Milnes noted that the changes would have a “rationale” if they were a move towards more neutral taxation, but does not believe this to be the case.
“But rather than being a move towards neutrality, as was claimed, they in fact represent a further penalty against private provision of rented properties by potential suppliers who cannot, or chose not to, invest via a corporate entity,” he explained.
Mr Milnes is unsure of the reasons for the tax changes and does not understand why the government would change the current situation for smaller landlords.
He believes that the tax changes could mean property owners need to generate a required initial yield of up to 5.83 per cent and tax would have to rise by around 20 per cent to offset these charges.
However, Mr Milnes maintained that not all rents would rise by 20 to 30 per cent, as some buy-to-let properties owned by basic rate tax payers would be mainly affected by the stamp duty change and may not need to increase as much.
He went on to say that first time buyers are hindered by the reduction in rental property supply, which is creating a situation where people feel pressured into buying a mortgage at a young age due to the poor rental options available.