UK Landlords are struggling to keep up with tax increases, causing them to hike up rental prices for tenants. According to the latest figures from the Office for National Statistics (ONS) that reveal annual private rental prices rose by an average of 6.5% across the country. Propertymark have spoken to a landlord who says ‘taxes are making it difficult to operate, as we need to find a way to pay for increasing taxes’.
In 2015, then Chancellor George Osborne decided to reduce the available tax relief on mortgage interest costs and remove the 10 per cent wear and tear allowance for fully furnished homes, which has hindered the opportunities of small investors due to the fact they can no longer offset finance costs against tax liabilities.
The 2015 tax changes have affected one student landlord, who agreed to speak to Propertymark on the condition of anonymity, who said that taxes are making it ‘difficult for him to operate as a landlord as it feels like people in general are getting taxed more, and that rents keep going up as a result because they need to find a way to pay for those increasing taxes’.
The private landlord explained to Propertymark that landlords ‘are on the frontline politically’ and that it is tiring for them to be used ‘as the reason why rents are increasing when that is simply not true.’
They added: ‘Government support that would be most welcome for us would be tax support or the relaxation of existing thresholds. More importantly for me, I would be pleased to see any government be more aware of the positive work we do as landlords and be more considerate and positive towards the industry.
‘As a group (private landlords), we manage a huge percentage of rental property, effectively being partners to the Government in the accommodation supply train. I feel the press and Government’s attitude is biased towards tenants’ issues, and landlords face an uphill battle in this regard.’
The negative perception that many people have of landlords, which the private landlord referred to, was reflected in one 2023 study, which quoted a 2017 YouGov study that discovered they were associated with being ‘greedy’, ‘difficult’, and ‘wealthy’. One landlord who was asked how they felt about people’s perceptions of them during the study said that the media ‘are always on the lookout for bad stories.’ This just shows the uphill struggle many of them face when they are trying to transform people’s perceptions of them.
Despite this, the UK Government’s latest Spring Budget reduced Capital Gains Tax from 28 per cent to 24 per cent, which Chancellor Jeremy Hunt said would increase the number of transactions. However, there was no Stamp Duty relief which can stifle supply in the private rental sector because it is applied to every property bought, which, according to Propertymark ‘hinders market activity’.
The private landlord Propertymark communicated with, alongside Propertymark’s own data gathered by members, has recorded the volume of private rental properties dropping, which also causes rents to rise due to a shortage in supply and a surge in demand due to many people competing for the same property. A study titled, A shrinking private rented sector, discovered that 53 per cent of buy-to-let properties sold in March 2022 left the private rented sector and there was a 49 per cent depletion in properties available to rent per member branch in March 2022 compared to March 2019. The increase in service repair costs has also affected landlords, as they need to maintain their properties.
Homeowner mortgages were in arrears of 2.5 per cent or more of the remaining balance in the fourth quarter of 2023.
