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If your landlord has approached you to say your rent will be increasing, it can come as a shock. But it’s important to be aware of what might be affecting your landlord’s decision to so do- and it’s not necessarily because they want to make more money. 

Interest Rates are Rising 

If interest rates have increased, this may be affecting a landlord’s mortgage payments or other loans taken out to fund their investment. Landlords do not make a huge profit out of letting a property, it’s an investment for their future- just like you may keep money in a savings account and earn interest over the years. 

Investment in Their Future 

A large number of landlords are ‘accidental’, meaning they didn’t set out to rent a property but circumstances, such as a new relationship or moving because of a job, left them in that position. Many others invest in a buy-to-let property to save for their pension, as returns are often a little better than interest rates on savings accounts. 

Section 24 Will Affect Landlords and Tenants

From 6th of April 2017, the government has changed the way landlords are taxed. The act is called Section 24 of the Finance (no. 2) Act 2015, also known as Section 24. It will mean landlords will be taxed on their costs as well as their profits, something that no other business has to do. Many landlords are going to see their tax bill rise so much that they will no longer make profit and some may even make a loss.

Axe the Tenant Tax

It’s also known as the ‘Tenant Tax’ because this won’t just mean landlords pay more tax, it will affect millions of tenants too. If your landlord finds themselves no longer making a profit from their investment, they may be forced to increase the rent. It’s important to understand that this is not to make more money; it’s simply to cover costs and continue seeing a small return on their investment. 

Forced to Evict

For other landlords, the implications may be more serious. If they cannot increase the rent, they may be forced to sell the property to avoid making a loss on their investment. This will mean evictions for many tenants and is not something any landlord wants to do. 

Get the Lowdown on Section 24 

We’ve created a free, downloadable PDF document to explain what Section 24 will mean for tenants. Download here.

You can also download our Ultimate Section 24 Guide here

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