Chancellor George Osborne is presenting the “summer budget” tomorrow with rumours circulating that he will give in to calls to close some of the tax breaks given to the buy-to-let sector.
In recent weeks there have been various requests for such tax breaks – the equivalent of £5 billion, £10 billion or £14 billion a year, depending which analysis you read and believe – to be closed, especially in the context of the Conservative government cutting a predicted £12 billion from welfare spending.
The latest call for a clampdown has come from the Green Party. Its housing spokesperson Tom Chance says: “Young people have been let down by successive governments who have priced them out of ownership and left them renting with some of the weakest protections in Europe. We need rent controls and security of tenure to give young people a chance, and an end to the generous subsidies for buy-to-let landlords, with that money redirected towards providing more social housing.”
Tax deductible expenses open to buy-to-let landlords include mortgage broker and arrangement fees, mortgage interest, letting agent fees and their associated tenant-finding and management costs, building and contents insurance premiums, maintenance and repairs, furniture and general wear and tear, ground rent and service charges, council tax and utility bills during void periods, and a range of low cost activities such as visiting property and telephone calls and stationery charges incurred while managing the buy-to-let.
However, these tax-deductible expenses are allowed to the big institutional investors which are currently pouring into the fledgling Build To Rent sector, and some property analysts have said it would be unfair to allow such tax breaks to institutions and not to the thousands of individual investors who have formed the backbone of buy-to-let.
This point was also raised in a Telegraph article by Richard Dyson last month on why landlords should keep their tax break.
In the spring the campaigning charity Shelter claimed landlords actually enjoyed £14 billion in tax breaks in 2013; it says some £6.3 billion of this was tax relief against the cost of mortgage interest alone in the 2012-13 financial year.
It’s already been leaked by the government that Osborne will create a mechanism to increase the rent of relatively high-earners living in some housing association or local authority properties. There have been no leaks yet about private sector changes.
The Chancellor’s Budget is revealed on Wednesday lunchtime and full details will be given on Landlord Today.