Rising rents and clause 24

On the 28th February 2018, MSN and the Daily Mail reported

Experts warn of buy-to-let crunch as landlords sell off unprofitable properties and hike rents

David Cox, ARLA Propertymark chief executive, said it pointed to ‘a rough ride’ for renters in 2018.
‘Housing stock is falling as rising taxes continue to force established landlords out of the market and deter entry into the sector,’ he said.
‘And the volume of renters is increasing as the cost of buying a home is moving further out of reach for many. The fact that one in five tenants is experiencing rent increases is just another blow.
‘Ultimately, until the prospect of investing in the buy-to-let market is more attractive for prospective landlords, and stock subsequently increases, tenants will continue to feel the burn.’

We have known for some time that Landlords have been hit hard by recent tax changes:

  • Clause 24 restricting relief for interest
  • 8% extra capital gains tax
  • 3% extra stamp duty

How much extra tax do Property Investors pay?

We also know that Companies are a better way to invest in property for most investors because

  • Clause 24 doesn’t apply
  • The extra 8% capital gains tax doesn’t apply to Share Sales
  • The stamp duty on shares is 0.5%

It hardly surprising that individual property investors will be increasing rent to cover the extra taxes.

Some landlords with high levels of borrowing will definitely start selling off properties to avoid clause 24, which will lead to some landlords becoming insolvent.

How will Clause 24 affect you?

But for those Landlords investing via Companies, the higher rents will lead to enhanced profits.

steve@bicknells.net

 

 

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