“Unthought-through”, “unfair and unreasonable” and leading to “extreme confusion” - those are the thoughts of Britain’s leading professional accounting body on George Osborne’s proposed buy to let tax changes.
The Institute of Chartered Accountants in England & Wales, speaking to the Daily Telegraph, has slammed the Chancellor’s controversial new tax on buy-to-let tax as “unfair and unreasonable” saying it will force some landlords out of business, distort the private rental sector and make life harder for young potential buyers.
Osborne announced in July that from 2017 he would be clamping down on buy to let landlords by removing the right to claim more than the basic rate tax equivalent in relief for mortgage interest. He is also tightening the rules about claiming for wear and tear by allowing claims only for money spent rather than the annual 10 per cent of rental that’s currently allowed automatically.
The measure is included in the Finance Bill now going through Parliament. The ICAEW has told the Telegraph that Osborne’s professed bid - to create a more level playing field between property investors and owner-occupiers - will actually disproportionately hit small property investors, who include middle-class savers adding one or two buy to let properties to their pensions and other portfolios.
“Large companies investing in residential property will not be affected – and will be able to continue claiming tax relief. Wealthy investors buying cash are also excluded” says the Telegraph article featuring the institute.
“Far from being level, it leaves the playing field with a cliff edge in the middle” says the ICAEW.
“Taxpayers will have priced and borrowed according to the tax relief they expected, and these borrowing decisions would necessarily have a long timeline. Many will not be able to restructure their debt” it claims.
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The most insidious part of this change is that it does not respect the normal rules of business, that you only tax profit not turnover. The result of this change will mean that at best higher rate tax payers will lose a disproportionate percentage of their profit to the treasury and at worst they will be forced into loss. This is not what landlords signed up for and is a callous betrayal of trust.
I disagree.
The tax advantages and the good returns one is receiving on buy to let properties, which is subsidised by the government by housing benefit, means that home owners cannot compete in such a market.
The net result, if unchecked, is home ownership will reduce and the private rented sector will increase. This will mean ever greater disparity between the haves and have nots.
It is essentially that government reduce the attractiveness of buy to lets, as an investment, by changing the tax system, increasing security of tenure and implementing rent controls.
Anyone who argues differently needs to question their moral compass
Peter,
You say landlords are subsidised by the Government through housing benefit payments yet the LHA rates are in the lowest 30% of all rents on the market.I rent to housing benefit but let me assure you I am not going to continue especially if this new tax comes in.I am switching to working people or tourists.I will make more money and the threat of this tax has motivated me to change direction.
It will be the poorest people on benefits that are going to be hurt by this tax and when they have no where to live the Councils will have to pay for B&B.I really think this tax is going to back fire.Time will tell.
Landlords make up about 18% of the housing stock and many of the tenants will never qualify for a mortgage.If there are fewer properties to rent, where will all these people live?
We need to build more houses, reduce immigration and reduce the population.
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