According to the OBR, a sustained rise in rents is “more likely than not” if demand continues to exceed supply.
Landlords who respond by increasing rents would also pay the higher tax rates on the additional profit they receive.
Property experts have reacted with fury to the announcement. Nimesh Shah, chief executive of Blick Rothenberg tax experts, described it as “a bit of a ‘final nail’ in the coffin for buy-to-let landlords,” warning that mortgage interest relief restrictions mean some landlords now face effective income tax rates exceeding 50 per cent.
Greg Tsuman, managing director for lettings at Martyn Gerrard estate agents, called the additional rise “lunacy” and a “severe blow,” adding: “At this point, the Government may as well criminalise renting out a property.”
Marc von Grundherr, a director at Benham and Reeves, said landlords “have been kicked while they’re down once again.” Mr von Grundherr warned that dwindling investment appeal would push more landlords to quit, further reducing rental stock and driving up rents for tenants.