Buy to Let

First signs of rising rents as buy-to-let investors pass on higher tax

The first widespread evidence of landlords raising rents in response to a range of tax increases has led to commentators insisting that buy-to-let remains a viable investment for many.

According to research by Your Move, the letting agents, the average rent in England and Wales has risen by £75 since January, which could signal the first response from landlords to the tax squeeze.

Government data shows that average rents had remained stagnant at around £650 a month for much of the past two years. But the Your Move index suggests they have begun steadily rising in the past 12 months, with a spike since the tax relief changes began to bite making the average rent £873.

From April 2017, buy-to-let investors can no longer offset all their mortgage interest against profits before calculating a tax liability. Over coming years the amount of interest that can be offset declines until 2020, when it cannot be offset at all. Instead, a 20pc tax credit will be applied. Lower-income landlords who do not pay 40pc tax should therefore not be hit. Worst affected will be higher-rate taxpayers who have large mortgages on their buy-to-lets.

The introduction last year of a 3pc stamp duty surcharge on buy-to-let property purchases was a further blow.

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