Chancellor Philip Hammond looks extremely unlikely to reverse his predecessor’s ‘Section 24’ tax assault on private landlords in tomorrow’s Autumn Statement.
A letter from the Treasury, in response to a report by landlord Dr Rosalind Beck on the impending tax change, says: “The Government stands by the reasons why the change is being implemented.”
From next April, the ability of private landlords to set mortgage interest costs against tax will be progressively phased out, with landlords from 2021 being given a tax credit equivalent to basic rate tax.
Beck, like other landlords, believes this will be immensely damaging to the private rented sector as a whole.
However, the Treasury – which took almost three weeks to respond to Beck – said: “The Government wants to ensure that landlords with the largest incomes no longer receive tax relief on their finance costs at a higher rate than those with lower incomes.
“Additionally, income tax relief for finance costs is not available to ordinary home buyers and not available to those investing in other assets such as shares. By restricting the relief to the basic rate tax, the Government is aiming to reduce these distortions.
“We estimate that only one in five landlords will pay more tax as a result of this measure.”
The Treasury letter said that phasing in the change gave landlords time to prepare.
Beck said the Treasury reply was dismaying and insulted the intelligence of landlords.
She said that Section 24 will not affect landlords with the largest incomes, but will hit those who owe the most in finance costs.
She said that phasing in a “bizarre and unjust” tax regime will not allow people to adjust.
She went on: “We are not stupid. We know that this is a euphemism for increasing rents, evicting, selling up and/or going bankrupt. Strangling a person slowly to death is not that much more preferable to delivering a swift blow to their head.”
Yesterday, radio’s You and Yours programme debated whether private landlords have been victimised by the Government.
If the Treasury was at least honest about what they’re doing I’d be a little happier. It’s all about tax take.
So they want to ‘level the playing field’ with investing in shares??? Good grief if they’d like to spend a few days with me to understand why this is a ridiculous comparison I’d be happy to show them. And if they still insist on the comparison then perhaps they’d better give us the same CGT treatment as well.
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Has any clever mathematician analysed at what point it would be cheaper for a landlord with a mortgage, (therefore x amount of gross profit pa) would be to keep a property empty rather than to pay the extra tax incurred by being bumped into the higher tax bracket/losing child benefit be taxed on the extra rent etc.
It’s an option I’m seriously considering as the extra stress of collecting raised rents that I know my tenants can ill afford will be greatly elevated.
We in Yorkshire have not seen our property prices reach pre-recession prices yet and the only investors buying in certain areas are foreign or out of town investors with no interest in these areas but just looking for distressed vendors for bargains with no interest in maintaining the properties or the effect of bad tenants on an area. That said I am also considering as are many landlords in the area just how much loss I should take to walk away from the looming addititional tax burdons – or as I see it how much I should subsidise all these foreign investors, (yes the upside of a fallen pound! lots of Chinese, Indian etc investors sniffing around, oh and guess what setting up British Ltd Companies to get British mortgages that they can offset against their expenses!).
I as many landlords offer single lets, eg full houses and extremely spacious flats as family homes with families in residence for many years. However their is no recognition of this type of landlord with many local councils in our area allowing a tidal wave of ‘studio flats’, (‘self contained’ bedsits) with seemingly every other small terrace being converted into five or six of these ‘properties’. However it suits their spin as they appear to be meeting their obligation of providing ‘thousands’ of new homes.
Sorry rant over – realise I have covered lots of issues. The original question stands at what point is it better to keep our properties empty?
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Maybe one should be looking at those that sit on HM Treasury advisory panels for an answer, particularly those that say they are there as a representative of the industry?
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