Paul Johnson - a director of the Institute of Fiscal Studies since 2011 and a visiting economics professor at University College London - has urged the abolition of stamp duty for private landlords.
Writing in The Times and on the IFS website Johnson - a regular figure used by news organisations as an independent analyst of economic policy - says: “Not only do prospective landlords have to pay extra stamp duty, they pay far more tax on other aspects of their investment than do owner-occupiers. They pay tax on rental income received, with now only limited tax relief on mortgage payments. A higher-rate taxpayer whose rent receipts only just offset their mortgage interest payments will still pay tax of 20 per cent on their rental income.
“Landlords also pay capital gains tax on the sale of the property, including on purely inflationary gains. Even ignoring stamp duty, the effective tax rate on the real return received by a higher-rate taxpayer buying a property to let, with a 50 per cent mortgage and selling after ten years is something like 76 per cent. That rises to 86 per cent for additional (45 per cent) rate taxpayers and can easily exceed 100 per cent for landlords with bigger mortgages.
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In many respects SDLT is the least awful tax. Mainly because we know about it before making a decision whether to purchase or not. Of course it makes a great many properties completely unviable for use as rental properties but wasn't that the main reason for the extra 3% landlords have to pay? The unintended consequence is possibly that we now buy much smaller properties and may be seen to be denying FTBs the opportunity to buy those cheaper units. The last 4 properties I have bought have been one and two bedroom flats mainly because the amount of cash needed up front for deposit, SDLT and fees was way too much for anything bigger.
The current CGT and tax based on turnover are both worse than SDLT because they were suddenly invented after we had bought. Both have completely trashed our business plans and financial projections.
Not allowing finance costs to be fully deductible was bad when interest rates were rock bottom, now it's just insane. To cover a £500 a month increase in mortgage payment most portfolio landlords would need to increase rent by £667 a month to break even. If by increasing the rent their fictitious taxable income goes over £100K they would need to increase the rent by £1000 to break even (£500 extra interest to the lender, £600 extra tax, £100 tax credit). While only 20% of landlords are classed as portfolio they own about 50% of rental properties, many of which are HMOs, so this impacts a huge number of tenants. It also means every landlord who charges market rent is charging their tenants for this extra tax whether they actually pay it or not.
CGT in its current format punishes both landlords and tenants. The longer we own the higher the CGT bill and the bigger slice of our asset is stolen. To minimise this landlords need to sell up before the gain is too big and this means evicting totally blameless tenants. The whole point of taper relief was to encourage long term stability for tenants. Not having taper relief or indexation relief is a huge disincentive for anyone to enter the industry. There are far better investment opportunities that give much greater control on when to sell CGT friendly parcels of investment and don't phone up at inconvenient times wanting repairs.
As ever, Jo is spot on. I had a plan to sell some properties that were inconveniently located & rebut something else closer to home. CGT & SDLT made. that unviable, so now, and with the RRB coming, I am just selling.
Try living with 6% stamp duty as it is in Scotland, thanks to the SNP!!
Jo. Very good please email Martin Lewis Money saving Expert for an apology for his one sided unjustified on Private Landlords last night.
Also he had a Representative from Shelter attacking landlords Degrading us, encouraging Tenants to Claim thousands from us for what ?.
Landlords were not Represented at all on the Program.
Showing a graph showing
Rents shooting up for ever but didn’t outline the reasons & huge costs imposed on us.
All landlords please check last nights Program Martin Lewis on ITV and respond.
I watched it 😱 it was bad, as per, we are all really bad and tenants need to take legal action against us at every available opportunity. 🤷♂️
Martin Lewis is an ambulance chasing hypocrit making millions out of usually stating the obvious or playing both ends against the middle.
On the one hand he's telling deposit account holders they're being ripped off if they don't chase higher deposit account interest, which feeds into higher borrowing costs and higher rents. On the other hand, he's encouraging borrowers to chase lower interest rates which feeds into lower rates for savers.
He's also encouraging people to constantly change current accounts for the £200 welcome bonuses which just puts free banking more at risk.
I did initially support his campaign against banks charging £35 for bouncing cheques, direct debits etc. but he lost the supreme court appeal with the result that almost all overdrafts are nearly 40%, whereas they used to be as low as 2% over base.
I didn't see his programme but I bet he didn't point out that many landlords have seen mortgage rates triple whereas rents have been frozen or capped at 3% whilst inflation was 11% for many landlords.
I wonder how much of his multi million windfall on selling to moneysupermarket he donated to the needy? Did he pay millions in cgt or avoid it by taking payment in shares, a ploy denied to landlords selling to their own limited company?
Beadle should be demanding another programme to present the counter argument but whilst we wait on that we should all raise complaints with ofcom over the biased presentation last night.
It’s about time LL’s stood up to the likes of Shelter and email the CEO Poly Neate on her £150k a year salary spouting about the ‘blameless eviction’ etc. Well we all now S21 is a faster route to remove tenants that don’t pay or we have ASB issues with. How is that no fault!
Poly, in her position should be lobbying government to reduce tax to sustain this fast eroding PRS!
One would hope that the NRLA would also push Shelter on this extremely valid point.
Get emailing guys. We need to be heard!
polly_neate@shelter.org.uk
I know all about Tenants ringing up at inconvenient times even last Saturday night 11 o’clock pm. They had a problem the message demanding immediate action, a big long litany about it and it’s been like that for weeks but this is first time to tell me anything. Anyway way I dealt with it next day Sunday and it turned out it was something they had done.
A few typo last message maybe too early or HE phone decided to change it as I press send.
11 pm on Saturday is a favourite time for such calls- after closing time so it doesn't interrupt their drinking time!
Let it go to voice mail and ignore until next day
I leave my mobile downstairs at night where I can't hear it.
If there was a family emergency they know to ring my landline.
This man is using a model called Porters 5 Forces to generate his ideas. This model looks at the 5 forces which affect co.petition in the market. He is attempting to re.ove barriers to entry to the market, allowing people to easily enter the market. If their barriers to exit, for example capital gains tax, competition forces at the expense of landlords margins. This is irresponsible.
Yes please this would enable me to to keep my buy to lets for my pension which was my original plan 20 years ago. I'm 68 this and have worked hard all my live saving and investing for my retirement and I have reach that age, and I fill like I'm being robbed by the TAX man. This so wrong !!!!!!!
Absolutely shocking, we are in a similar situation. Work for 50 years and these parasites think they can just take whatever they want and give it to the bone idle!!
Could we have Paul Johnson as the head of the NRLA along with the other guy Sim who also spoke perfect sense regarding landlords.
The problem here is that the Tories want us all to incorporate our portfolios and generate an instant CGT windfall for them. They hate that all those unrealised gains will be available for future treasuries and have an agenda to make the tax burden too much to bear. They don't understand how the country works and are oblivious to the consequences of their stupid anti private landlord agenda. Trouble is, if we are the golden goose and are held responsible for sky high rents, will the next lot change anything? Of course not.
Could we have Paul Johnson as the head of the NRLA along with the other guy Sim who also spoke perfect sense regarding landlords.
I do not believe any government has the foresight to understand how the PRS works. They do not consider us as a business. But also fail to see that the investment has to be profitable for the landlords to stay with these investments. They have persistently eroded any possibility of landlords to stay in the market and is also making it impossible for new entrants, especially with greedy Shelter poking their noses into something they do not understand and do not wish to help the social tenants by paying their rents. If shelter had to pay the defaulting tenants rent, then they may have a different story. Why is Martin Lewis not asking shelter to support the defaulting tenants financially instead of commenting on the landlords? Why can't Martin Lewis not see the truth, if he is so good at researching the truth? Why is he deliberately turning a blind eye to the increasing costs for the landlord without the high interest costs within a year. I have already started selling, no capital gains on 2 properties but paid a lot of interest on loans for over 12 years on new properties that never went up drastically. Some new properties have mis-sold for a higher prices and I can see the greedy builders are still continuing to do so. My older properties have faired a lot better and paid a lot of tax. Sell 5 of them within the next 4 years, so I can afford to keep some empty if the legislation makes it difficult to rent them out. The property rental income was to be my pension, but it has not been possible to enjoy the proceeds as it is being depleted by taxes and high cost of maintenance to meet legislation.
Vibha, fully with you on this as I have done the same.
I have just spoken to the NRLA policy team regarding the cancellation of my membership. The person I spoke to was very engaging in terms of wanting to know my view and also to put across their position politically.
She agreed with a lot of what I said especially around member engagement Re: S21 S24, also the current trend of councils advising tenants.
While she said the feedback was constructive I must admit I do have a slightly different view of them now. That said I am still cancelling unless I see some of the things I mentioned changed.
Martin Lewis wouldn't risk the potential unpopularity of presenting a balanced programme..
Little put on person, no matter how feckless = good.
Successful person or company making a perfectly legal profit and paying the vast majority of all taxes = bad.
Incidentally around 30% of all UK income tax is paid by 1% of taxpayers and in Scotland, 11% of taxpayers pay 60% of all tax, meaning the remaining 40% is spread among the remaining 89%, with many of them contributing zero whilst milking millions from working taxpayers.
No wonder there are so few right wing politicians left as so many voters have their noses firmly in the trough!
I am selling up. Repeal section 24 and I would stop. Although I need to sell to pay my tax. My tax bill this year is higher than my profit, by a long way.
Paul Johnson should be Prime Minister, or at least head of the Treasury. There’s still some sense left in the world then. He was always a keen opponent of Section 24 and I can’t fault a word he says about landlord taxes. Put him in power NOW!
Rumor has it that all PRS landlords are to be herded together by government decree, then stripped naked, marched barefoot to Trafalgar Square and horsewhipped to within an inch of their lives in order to teach them a lesson and never dare to make the same mistake of working all the hours god sent in order to somehow purchase a property with the intention of letting so as not to rely on the pittance of government pension whilst also putting a roof over the head of a family at a reasonable cost of rent.
This Report is on the mark if we hold a property for 10 years and sell with no allowance for inflation we will be paying between 76% and 86% Tax .
high interests rates , Renters Reform Bill , Selective Licence, constant unnecessary regulation. Is it going to be viable to be a private landlord.
I presume your question was rhetorical.
Good Point Jo ,
For a landlord to maintain any form of profit Rents need to go through the roof .
Yes Annoyed,
If we are forced to sell up that is Billions Billions of Capital Gains and lovely Stamp Duty Tax. The Government can put towards a small plane to Take 5 or 6 people to Rwanda for a fortnight.
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