Ban on lettings fees: Collateral damage to rural economy?

24 November 2016

Wilsons says the Autumn Statement announcement of a consultation, which proposes to ban letting agents from charging fees to tenants in England, could (in shifting the burden of such fees to landlords) add to the negative impact of other recent tax changes on rural landlords.

Wilsons explains that as a result of the changes, landlords will have to bear the administration fees charged by estate agents. The rules are also likely to apply to private landlords who manage rental properties themselves, as is common in rural areas.

Wilsons point out that the development comes following a string of changes by the last Chancellor which will see landlords foot increasingly large tax bills.

Belinda Watson, Partner at Wilsons, comments: “This initiative is clearly aimed at protecting tenants, however, coming in the wake of  a string of new tax changes introduced earlier this year, this will add to the costs of rural landlords.”

“The recent tax changes are clearly aimed at tempering the buy-to-let market – but in the meantime, they will also cause serious collateral damage to rural landlords who in many cases depend heavily on rental income to supplement their income from agriculture or running a heritage estate business.”

Wilsons explains that the Finance Act 2016 removed the annual “wear and tear” allowance for repairs to rental properties.  Landlords are now instead asked to absorb the cost of repairs upfront and claim retrospective deductions for actual repairs against their rental income as and when money is spent.

Wilsons adds that tapering restrictions on landlords' finance costs, which will apply from 1 April 2017, will also prevent landlords from being able to offset the full cost of borrowing against rental income.

Belinda Watson, says: “Costs to landlords of running a rental property are becoming increasingly high – especially where older, homes are concerned.”

“These increased costs may be relatively easy to pass on to tenants in urban areas – however this may not necessarily be the case in rural areas.”

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