CAMPAIGNERS have hit out over “threats” from landlords that rents will rise in the wake of the Budget move to end tax benefits on buy-to-let properties.
Chancellor George Osborne said he was scrapping the tax relief to create “a more level playing field” between investors buying a home to let and people buying a home in which to live.
But the Scottish Association of Landlords (SAL) described it as “a shocking decision” which unfairly discriminated against landlords who provided much-needed housing. Edinburgh has one of the biggest private rented sectors in Scotland, at least half of which is estimated to be buy-to-let.
Landlords can currently deduct costs, including mortgage interest, from their profits before they pay tax. Wealthier landlords receive tax relief at 40 and 45 per cent, but this tax relief will be restricted to 20 per cent by April 2020.
And from April 2016, a “wear and tear allowance”, which permits landlords to reduce the tax they pay, regardless of whether they replace furnishings, will be abolished in favour of a new system that only gives tax relief on actual replacements.
SAL chief executive John Blackwood said: “Landlords will essentially be taxed for investing in their businesses, something utterly unthinkable in any other sector.
“As a result of this increased cost and risk to landlords, you may see some within the sector feeling they are forced to increase their rent levels which would obviously have a huge negative impact on tenants.”
But the Living Rent Campaign, a coalition of tenants, trade unions, student organisations and faith groups, condemned the comments and said statistics showed rents in many parts of Edinburgh had increased by more than ten per cent over the past year.
Spokesman Jon Black said: “This Budget contained no good news for tenants whatsoever, but these threats from the Scottish Association of Landlords go one step further. Rents in Scotland are already out of control, and now tenants are being hit again.
“Landlords receive billions in subsidies from the taxpayer, and to use this as an excuse to increase rents is appalling.”
Thomas Ashdown, managing director of letting agents Citylets, said some people might argue tax relief should never have been given on buy-to-let. “But landlords will see this is another squeeze on their margins. Some will decide just to take it and accept a reduction while others will increase rents.”