Debate over spending cuts and taxation is increasingly asking whether landlords should continue to receive an estimated £10 billion - or more - in so-called tax breaks.
Ian Cowie, winner of the ‘financial commentator of the year title’ at the recent Headlinemoney awards, says in the Sunday Times that he is breaking the habit of a lifetime by advocating a tax rise, not a tax cut.
“At a time of austerity, when cuts must be made in many areas we may wish to support, this raises serious questions about whether investors in bricks and mortar should continue to receive unlimited mortgage interest relief 15 years after it was withdrawn from home owners” he writes.
Cowie’s latest call comes in the same edition of the paper that carries a front page headline anticipating £12 billion of cuts in welfare spending, possibly to be announced in the extra Budget that is being give by Chancellor George Osborne on July 8.
Cowie says he has nothing against buy to let nor landlords “but I am anxious about some baby boomers who benefited from decades of house price inflation seem willing to kick away the ladder, trapping younger folk as perpetual tenants in ‘Generation Rent’.”
Tax deductible expenses by 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 the property and telephone calls and stationery charges incurred while managing the buy to let.
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.
Shelter chief executive Campbell Robb has told the media that: “In the context of looming welfare cuts and a dramatic shortage of homes, all those struggling to keep up with sky-high housing costs will be shocked to hear that a massive £14 billion has been given in tax breaks for landlords in just a year.”
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These are not "tax breaks for landlords", but normal expenses associated with running any business. If GSK borrow money to build a new factory they would off-set the cost of the interest against their annual profits, as any business would do. The same applies for any of their other normal business expenditure.
Why should you consider landlords to be different from any other business people simply because the asset they invest in happens to be a house for someone else to live in? Is this idea being floated simply because the small landlord is an easy target for government, whereas a company like GSK would have the ability to take HMRC to task if they even suggested these new rules applied to them?
The government and local authorities need the PRS to invest in more housing to meet current and future needs. If you change the normal accounting rules for BTL and make it a special case, different from any other business, you will destroy the industry. How can you disallow certain expenses from private landlords without also changing the rules for RSL's, REITS and the multitude of PLC's which also invest in housing?
What about the build to let industry which is in its infancy? Do you suddenly disallow most of their expenditure from their operating costs? If so, you would kill it stone dead - and goodbye to the government's target of an extra 200,000 homes we need each year.
There has been a lot of recent talk about the interest landlords claim back from the taxman. We need to move way from this idle chatter and see landlords as operators of businesses - nothing more, nothing less. Only then will we have a proper discussion about the PRS and its place in both the business world and the wider community.
Yes, but it's whether or not you consider being a landlord as a business. Some do, many don't.
If we see housing as a basic right - i.e. everyone should have access to it and we should help shelter those most in need, which I think most right-thinking people would agree with - then it shouldn't be at the behest of landlords treating it as a business and milking as much money from it as possible.
I don't agree that landlords shouldn't exist or that buy-to-let landlords should be completely obliterated, but I'm not so sure that they should be seen as businesses either. Otherwise you get situations like Fergus and Judith Wilson, who owned an obscene number of properties, made an obscene amount of money from them, and flouted the law on more than one occasion. These are not the sort of people we should be holding up as innovators.
First-time buyers and young people who have already given up on owning a property in their lifetime are hardly going to have much sympathy when they see these buy-to-let landlords getting tax relief and tax breaks. Where are these things for people trying to get on the property ladder? It's not fair. Other than gimmicks like RTB and Help to Buy, people looking to buy get nowhere near as much help as those looking to buy to let. It's ridiculous and needs to be challenged.
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