Government urged to scale back buy-to-let taxes to reduce costs to tenants

February 14, 2020
A model house model is placed on wood word TAX

The government has been urged to implement pro-private rental sector policies in April’s Budget in order to promote long term investment in the private rental sector and reduce costs for tenants.

 

Among a list of demands on the government, the Association of Residential Letting Agents (ARLA) wants an exemption to the 3% stamp duty surcharge for buy-to-let investors, arguing the policy has “stifled the private rented sector”, blaming rising rents on recent tax and regulation changes.

 

In December ARLA reported that 32% of agents witnessed rent increases, up from 16% in December 2017 and December 2018, a result, they said, of increased tax burdens on landlords who were passing on the cost to the tenant. Just 1.1% of tenants were able to negotiate a rent reduction last year, the lowest figure since records began, the body said.

 

The situation was exacerbated by a fall in buy-to-let investment, leaving a supply shortage at a time when demand was increasing.

 

The ARLA said abolishing the 3% surcharge on additional properties would encourage further investment into property. They said that without abolition or exemption, sales would continue to fall on second and buy-to-let property, both of which contribute towards the economy through tax.

 

“By failing to offer exemptions to institutional investors, the policy has where rents are rising. In February 2018, the Intermediary Mortgage Lenders Association estimated that buy to let investment fell from £25 billion in 2015 to only £5 billion in 201717. Furthermore, increasing the taxation burden on landlords’ results in costs being passed back to tenants through higher rents” the ARLA said.

 

They continued: “The government must recognise that in order to remain profitable, landlords will increase rents to cover the additional fees they are now faced with and as a result tenants will continue to pay higher deposits.

 

“This is important because if supply of rental accommodation falls further, tenants will only be faced with more competition for properties, pushing up rent prices on good quality, well managed accommodation and decreasing tenants’ ability to negotiate rent reductions.

 

“Therefore, we believe the government must consider launching a review of all taxes relating to private landlords in order to develop policies that promote long term investment in the sector and reduce costs for tenants.”