HAVE a read at the below response from The Treasury that arrived today about the proposed tax rises for landlords due to come in from 2017 onwards.
In my view this is a complete faux paux. It tries to dress an unreasonable tax up as levelling the playing field for homeowners. But the fact is private landlords are now going to be paying tax on costs. Private landlords are not normal homeowners, we are investors and business men doing our best to turn a small profit from a sector of the housing market.
In no language is it reasonable to tax our costs. And it is not only going to impact on new landlords, which in some ways may be construed as fair because it is then a known quantity before you buy to let a property and you can make an informed decision. It is going to affect all landlords retrospectively, so regardless of how you got into being a landlord, you will be penalised in the future.
This is a key flaw with the policy. I and many others have built a retirement plan based on privately owned rental properties that is now potentially unsustainable. Instead of facing a retirement funded by my properties, I am facing a sell off, massive tax bill and no alternative pension. If I kept the properties, my pension could cost me money thanks to the new tax scheme.
As for affecting only 18% of landlords, that is unbelievable when you run the numbers. But they will hide behind the OBS figures right up until the point they realise they have bankrupt a lot of people.
The only people completely unaffected by this policy are the landlords that own their rental properties outright. They are completely unaffected. The very richest are being bypassed with this tax – how typical of a Conservative Government to protect its own.
So that leaves me with the only course of action being to increase rentals and force tenants to pay more for the properties. And once again, the richest who are not taxed any more on this scheme will now get richer. It’s a terribly unfair tax, hitting all of us retrospectively and tenants are in for a hell of a ride.
Make no mistake, I cannot see any circumstances where this tax will be rescinded, so make your own plans for your rental properties now.
|Hi Jason McClean,
The Government has responded to the petition you signed – “Reverse the planned tax relief restriction on ‘individual’ landlords”.
The Government is committed to a fair tax system so is restricting relief on landlord property finance costs to the basic rate of tax, reducing the generosity for wealthier landlords.
The Government is committed to a fair tax system so is restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.
Landlords are currently able to offset their mortgage interest and other finance costs against their property income, reducing their tax liability. This relief is not available for ordinary homebuyers and not available to those investing in other assets such as shares. Currently the landlords with the largest incomes benefit the most, receiving relief at their marginal tax rates of 40% or 45%.
By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognises the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.
By unifying the treatment of finance costs for all individual landlords, the Government is reducing the distortion between property investment and investment in other assets, and reducing the advantage landlords may have in the property market over ordinary homebuyers.
Less than 1 in 5 (18%) of individual landlords are expected to pay more tax as a result of this measure. Taking account of the other measures from the Summer Budget, the Office of Budget Responsibility (OBR) have not adjusted their forecast for house prices. The OBR expect the impact on the housing market will be small. Furthermore, this change is being introduced gradually from April 2017 over 4 years. This will give landlords time to plan for and adjust to these changes.