Tax increases being imposed by the UK and Scottish governments will make it easier for irresponsible landlords to provide sub-standard housing to tenants, according to the Scottish Association of Landlords (SAL).
The organisation said the changes, which threaten to increase costs, will in turn jeopardize housing supply for those who believe renting is the most suitable option for them.
The changes include the phasing in of mortgage interest relief at the basic rate of income tax; income tax for some landlords will be calculated on the landlord’s income, not their profit; the 28 per cent rate of Capital Gains Tax will be cut to 20 per cent among other changes.
Also the ‘wear and tear’ allowance has been removed and replaced with only off-setting actual costs incurred on replacing furnishings, appliances and kitchenware in a rented property.
SAL, along with the Residential Landlords Association (RLA) south of the Border, have launched a joint campaign to convince the new Chancellor of the Exchequer Philip Hammond to reverse or amend tax changes in his Autumn Statement expected later this the year.
A YouGov survey for the Council of Mortgage Lenders (CML) suggested that 34 per cent of landlords will reduce their investment in the PRS as a consequence of these tax changes.
Alongside this, the Scottish Government has introduced a 3 per cent levy on the Land and Buildings Transaction Tax (LBTT) for those buying additional properties, including properties to rent out.
SAL has produced a guide giving more detailed information to members about the changes and has asked them to complete a short survey which will provide definitive, Scotland-wide, data on the detrimental effect the tax changes may be having already having, such as driving up rent levels which could threaten housing supply for those with no option but to rent.
SAL is also encouraging members to speak to their local MPs to tell them directly about the impact these changes will have in their area.
John Blackwood, chief executive of SAL, said: “With tax and legal changes being implemented at Westminster and Holyrood, there has never been a more important time for landlords to join trade bodies such as SAL. We need the data and information about the terrible effects these tax changes will have if we are to convince the UK Chancellor and Scottish Finance Minister to alter course.
“We know from our regular branch meetings around Scotland that landlords are already seeing increased costs as a result of tax changes. As well as impacting on individual landlords, we are concerned this could make it harder to tackle the current housing crisis by making it more difficult to attract much-needed investment.
“With the uncertain investment environment that has been created by the Brexit vote, at least in the short term, the last thing anyone in the housing sector needs is tax rises which will only make things worse.
“Furthermore, we are concerned that if costs increase, this could open the door for rogue landlords who don’t follow the rules on either tax or safety and quality standards at a time when real progress is being made at driving these unscrupulous players out of the market.”