Chancellor Philip Hammond has banned all upfront letting agent fees
charged to tenants during his first Autumn Statement. Hammond said: “In the private rental market, letting
agents are currently able to charge unregulated fees to tenants. We have seen
these fees spiral, often to hundreds of pounds. This is wrong. Landlords
appoint letting agents and landlords should meet their fees.” “So I can announce
today that we will ban fees to tenants as soon as possible.”
Scotland has
already banned letting agent fees for tenants.
It seems that this
ban will result in landlords facing increased costs such as picking up the bill
for referencing fees with agencies also potentially absorbing some of the admin
costs. It may be the case that landlords look to recover their incurred costs
by passing them back to the tenant through increased rents.
It may also be the
case that landlords, who have already been hit by cuts in mortgage relief rate
and a stamp duty increase of 3% on buy-to-let properties, may decide to cut
their losses. This could lead to a shortage of rental properties and again we
could see rental prices go up.
From the above
analysis the picture does not look ideal for agents, landlords or tenants. However,
there are some positive developments taking place which could help the
situation such as help for landlords announced in the 2016 Budget in the form
of two new income tax allowances of £1,000 each for trading and property
income. Individuals with trading income or property income below the level of
the allowance will no longer need to declare or pay tax on that income.
In addition, it
should be noted that landlords may be able to deduct any additional costs they
face from their income to make some tax savings. Furthermore, the Personal
Allowance is set to rise from £11,000 to £11,500 in 2017 and Corporation Tax is
set to be reduced from 20% to 17% in 2017 which again may help landlords to
make tax savings.
Published on: 25/11/2016
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