Housing Secretary Michael Gove has ruled out any reversal of Section 24 or other tax changes which have hurt landlords in recent years.
The Select Committee on Housing has written to Gove earlier this year demanding the government review the impact of recent changes to taxation rules in the buy-to-let sector “with a view to making changes to make it more financially attractive to smaller landlords.”
The Select Committee - which is an all party group of MPs analysing government policy on this area - says that at the very least Gove’s department should “be much clearer about what role it wants the private rented sector to play in the wider housing mix and, in particular, whether it values the involvement of landlords with very small portfolios.”
In a lengthy response, Gove tells the Select Committee: “While it is right that people should be free to purchase a second house or invest in a buy-to-let property, the government is aware that this can affect other people’s ability to get on to the property ladder.
“… Under the old system, landlords received relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers received a more generous tax relief than those on lower incomes.
“To address this, and make sure that all landlords are treated the same by the income tax system, the government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax. The reforms mean that all landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.”
Gove’s response points out that landlords continue to be able to claim relief at their marginal rate of income tax on the day-to-day costs incurred in letting out a property, such as letting agent fees and replacing furniture.
He then continues: “The government’s position is that finance costs are different to other expenses. Having a mortgage on a property allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without the mortgage.
“As with all aspects of the tax system, the government keeps the tax treatment of property income under review and any decisions on future changes will be taken by the Chancellor in the context of wider public finances.”
Gove concludes: “We need a thriving private rented sector that helps to accommodate these people’s housing needs. Given that 43 per cent of landlords own one property and over 80 per cent of landlords own one to five properties, we understand that the reforms contained in the Renters (Reform) Bill must work for smaller landlords as well as larger businesses.”
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Have the government not worked out we have a housing crisis because of the excessive taxation faced by landlords?
The comment "Having a mortgage on a property allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without the mortgage" could be reworded to say "Having a mortgage on a property allows the landlord to purchase a more expensive property, thereby paying far more SDLT and incur larger gains on the investment, thereby paying far more CGT or IHT than they would have done without the mortgage, not to mention the much higher income tax due to being catapulted into the 40% tax bracket."
Obviously the landlord doesn't actually pay all of those extra taxes out of their own non property related resources. They charge higher rents so they remain financially viable for all the years between buying and selling or dying.
It's all ideologically driven, so the only way forward is constant pressure until they see the damage it is doing. Section 24 inflates the cost of a mortgage by 33%, so this just has to be factored in to the level of rent and whether or not it is worthwhile for the landlord to continue to invest. I'm sure a in a future where sense prevails (if ever), somebody in authority is finally going to recognise that it contributes to lower supply and higher levels of rent. I wrote to my MP to point out that a modest mortgage of £300pm translates to an extra £100 of rent and she seemed to get it, but clearly Gove still doesn't.
Gove seems to have forgotten that when we had standard tax treatment landlords bought large amounts of new builds off plan which kick started numerous housing developments and facilitated the affordable housing elements of new estates to be built. We also bought the renovation projects that were hard to mortgage or required renovation that was way beyond the budget of most FTBs.
If you google ' Telegraph UK house building in jeopardy from landlord exodus' you'll find an excellent article by Melissa Lawford from May this year. It demonstrates the effects of LLs no longer buying new builds. Well worth a read.
Using his own figures, 57% of landlords own at least two properties. Can the idiot not see that landlords leaving the PRS will decrease the number of properties available for renters substantially?
As for buy-to-let landlords affecting other people’s ability to get on the housing ladder, does Polly Bleat write his scripts? The man is a fool.
I had that aurgument with a guy that told me that I was stopping him getting on the housing ladder until I pointed out that I bought run down properties from auctions that he would never have got a mortgage on, to which he replied '' so you addmit buying from auctions'' I never knew that it was illegal to buy properties from auctions
Andrew, I think LLs are not given enough credit for bringing houses back into decent conditions. FTBers often don't have the money or knowledge to do it & home owners rarely bother after their initial burst. LLs refurbish properties & maintain them.
@ Tricia. Well said. when my parents died and I decided to add my former home to my portfolio, it cost me £20,000 to bring it up to legal standards. My parents had lived there happily for just over fifty five years.
What a skewed argument. Maybe car hire companies should also be taxed on turnover as they can claim tax releif on their car loans while a private individual cannot.
I watched the RRB debate on BBC Parliament last evening 😨 tragic, the PRS has no chance WHEN Labour get in, none. 🆘☠️
I watched it too. A few Conservatives pushed the removal of S24 BUT no-one from the Labour benches mentioned LLs positively but just bleated on about tenants and their case studies. PRS is doomed under Labour.
Apparently they say RRB is just a START.
They also want RRO for non decent homes and 4 month notice periods not 2. It is a total embarrassment for Conservative policy that Labour will help the bill get over the line. i.e. the few rebellious Conservatives should be applauded for sticking up for LLs.
Gove is at NRLA conference today. I am glad I am not going as he will only repeat the consocialist drivel he spouted that would come out of Rayners mouth anyway
The con trick of being taxed on turnover with the 20% deduction at the end of the calculation means you can quite easily be bumped up into the 40% in the £ tax rate and your tax can almost quadruple. That, coupled with increased interest rates, more regulation etc means it's just not worth it anymore.
Talked about blinkered thinking. We all know the issues here as a Landlord whom has mortgaged properties. Even though I am at around 45% loan to value it is no longer a good business. It makes financial sense for me to sell to bring this ratio down further. Therefore less houses to rent.
What incentive is there for new Landlord's to enter the market!
One way traffic for tenant's is one way traffic for a lot of Landlord's to sell.
More misery for all and has already been pointed out, no change when Labour get in!
No but worse Andy. I fear MUCH worse. Nobody in that building down London . Has a f in idea what to do or Say.
The Government are sending this message to all landlords. Do not improve your properties, only replace appliances if you really have to, keep just within the law, decorate your property only when completely necessary. Replace carpets only when thread bear, bodge jobs, and pay the minimum on essential repairs only, when the property is on it’s last legs get rid so that you pay as little capital gains as possible. By imposing unfair tax burdens on the average Landlord they appear to want more of us to join the rogues.
We might as well join the rogues, if you can't beat them join them as the saying goes
All the comments here are absolutely correct but I think they are missing the point - the RRB seeks to destroy the idea of an individual with a small portfolio of properties. These portfolios - of which I am one - inevitably lead to evictions because they are driven by an individuals needs - all my properties will be sold as I get older. They want the PRS to fill the hole left by inadequate social housing & this is best served by companies, where the business is more likely to continue past one individual's involvement. The new PRS will be made up of companies, not individuals, and S24 is part of the stick being used to lever us out.
Totally agree with this. This is the core reason we are under such attack. But as usual poorly thought through and the consequences of this is the lack of supply.
Summed up nicely Tricia. 👍
Interesting point Tricia and I do tend to agree with your analysis. However, I don't think it will work for the next few years and for some not at all.
It will cause a lot of discomfort and misery for both tenants and Landlords.
More guff from Gove!
The irony is that the bulld to rent industry has also ground to a halt. Simple fact is that property rental is a business that runs on profit not charity is being ignored.
The expectation that council can now piggyback on to B2R providers for social housing is another magic money tree/ pie in the sky as they will need to cover their finance cost much of it coming from Homes England (the government) who will need to give more funding both as a loan and also eventually increase LHA to get rents to afford what will be in more expensive housing.
Gove is simply running over his own legs to save face of disastrous Osborne policy and kicking it into the long grass for Labour to deal with. PRS need to be talking seriously with Labour who are currently uneducated of the issues as led by populist mantra.
Eventually intervention will happen after
Just when I think they get it. ( Epc madness and section 21 on hold) Gove always proves me wrong. Just when I think they just might be worth voting for again they give you a reminder who taxed us to death and brought the so called renters reform bill ,Epc madness and section 24 in the first place.
Gove has stated ` We need a Thriving Private Rental Sector` Yes Really Mr Gove
Also the Article states 43% of Landlords own one property . and 80% own one to 5 properties. That means that out of every 5 Houses 4 are owned by small private Landlords.
The Housing Select committee, ( Who Gove is ignoring ) was correct to try and hold Gove to account
If only 50% of these Landlords have Mortgages on there properties who have seen their interest rates quadruple , and Tax doubled or Tripled . Gove could wipe out half of the current Renal Stock.
Gove would be wise to listen to them.
Gove and wise, I do so love oxymorons.
According to the English Private Landlord Survey 2021:
43% of landlords owned one rental property, representing 20% of tenancies. A further 39% owned between two and four rental properties, representing 31% of tenancies. The remaining 18% of landlords owned five or more properties, representing almost half (48%) of tenancies.
We should all be listened to but the ones who really need government policy to work for them are the portfolio landlords who provide nearly half of all rental accommodation and almost certainly house somewhat more than half of all tenants (as we are more likely to own bigger properties and HMOs).
Can the government honestly not make the correlation that we have record rents during a cost of living crisis because interest rates have risen and landlords can only offset 20% of their mortgage interest against their tax bill.
I haven’t seen one government policy to help ease the cost of living crisis.
Their farcical section 24 policy has increased rents faster than ever at a time of 40 year high inflation, anyone would think there is malevolence at play but we all know it’s simple cluelessness.
Oh how the Tories the supposed party of common sense has fallen.
Just think we have plenty to look forward to though this time next year our deputy PM will be a 43 year old grandmother who had a child before she had even left school. “A proper governmental policy maker for a change!” 🎉🍾👏🏻
Gove is a disgusting gimp-faced fool. I loathe him now more than ever. That response is moronic, and word-for-word what the Treasury has been putting out for 8 years. Pure nonsensical sophistry. Twisted, ludicrous stupidity dressed up as a respectable response. How is it possible for him to say he wants a ‘thriving’ PRS whilst simultaneously insisting it needs to be taxed out of existence?? Does not he or his colleagues ever stop to think how idiotic they make themselves look? An absolute farce. I’m about to start evicting 26 families ENTIRELY AND SOLELY because S24 means I can no longer provide the houses. A well-run 27-yr business needlessly down the toilet. How is THAT a ‘thriving rental sector’ then, Gove?! What a total dunce.
We have all been paying a very large amount of tax one way or another, but what worries me is Labour plans for landlord taxation.
Angela Rayner has said, in the recent past, that they would look at plans to raise tax on rent received.
She's just jealous of Gove.
So if other LLs are supposed to be buying up the properties that PRS LLs have decided to sell is the amount of Families ow B&Bs and Cheap Hotel Rooms drastically increasing?
Why are rental property demand be so great?
Why are rents so high?
Simple answer.
PRS LLs are selling to ordinary buyers not to other LLs.
How much will this way of housing families cost as demand goes up and up?
Who will pay all these costs?
It won’t be current PRS LLs as those that remain have had every drop squeezed out of them and there’s no more left.
The next thing will be the Government putting a “Living Tax” on everyone who works hard for a living.
The Government and Councils should have left well alone as the PRS LLs have been dealing very well with the housing situation taking the issue off of Government and Councils.
Now the Government and Councils seem to think they can do better.
All the best with that you clever diks.
We’ve been in the rental business for years and years and what we don’t know isn’t worth knowing
Government and Councils will have to set up all new Departments that start from scratch.
They will wish they never messed with us.
Lots more could be said but that’s it for now.
On Landlord Zone Gove is reported, "Speaking via video link to delegates at the National Conference Centre (main picture) Gove twice mentioned that he considered much of - but not all - poor compliance within the private sector to be the fault of ‘foreign landlords’.
Gove’s comments were part of his efforts during the session to reassure delegates that his new Renters (Reform) Bill is designed to weed out the ‘bad landlords’ by asking ‘good ones’ to shoulder more regulation such as the looming Property Portal, which will in effect sweep in landlord and BTL property registration across England."
So his solution to 'bad landlords' who do not comply with current legislation is to add more regulation for them not to comply with? How did this idiot get to be an MP, never mind a Minister?
So what’s new. I’m surprised anyone can hear what he says. Cos he’s got and dug himself such a DEEEEEEEEEEEP f in hole .
A couple of days ago some comments on percentages that I didn’t have time to read during the day. Jo is vey good and understands there’s only 100% of anything. 1 % escapes don’t know where that one went to.
Some other comment by someone stick out says 43% owns one property and 80% owns 5, sounds a bit Irish to me
pardon the phrase.
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