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Buy-to-let stamp duty timebomb means Londoners face £5,000 annual rent increase

Renters in the capital could see their annual rent increase by over £5,000 in the next five years as a result of the new buy-to-let stamp duty surcharge.

The 3% surcharge on second homes, introduced on 1 April, is primarily targeted at buy-to-let landlords and is levied on every additional property they purchase, in an attempt to free up housing stock for first time buyers.

However, research by Perrys Chartered Accountants has found that the introduction of the surcharge, combined with the proposed reduction in tax relief that will come into effect from 2017, may have the unintended consequence of forcing up annual rents for many Londoners.

With landlords looking to offset the additional long-term costs, Perrys believes that renters will be the ones to lose out, as their landlords look to recoup some of the additional expenditure.

According to the firm, annual rental charges could rise to an average monthly rent of £1,965 by 2021, up from today’s average of £1,521, representing an annual jump of £5,328.

Stewart Pope, Chief Executive Officer at Perrys, underlined the increasingly challenging conditions facing landlords and the impact this may have on the rental market.

He commented: “Those investing in property for the rental market who would have originally been paying £7,500 in stamp duty on a property valued at £350,000, will now have to pay £18,000 - a significant difference at over double the previous charge.

“This has been further compounded by the proposed reduction in tax relief that buy-to-let property owners can claim on their mortgage interest from their rental income, that will be phased in from 2017 and will be in full force by 2020.

“The natural result is that landlords will need to look for ways to recover these sums in the long term, particularly if they need mortgages to secure new properties.”

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