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Trade body asks government to give reasons for incoming tax changes

The Residential Landlords Association (RLA) is writing to the Office for Budget Responsibility asking it to provide clarification on controversial tax changes. 

From April, buy-to-let mortgage interest relief for higher tax rate paying landlords will begin to be restricted to the basic rate of income tax.

The RLA's action comes in response to a statement made by Treasury Minister Jane Ellison in Parliament last week. 

When answering a written question by Labour's Shadow Housing Minister John Healy, which asked for an assessment on the effects of the incoming tax changes, Ellison said that the new system will 'reduce the tax advantage landlords have over homeowners in the property market’.

The statement has been rejected by Paul Johnson, director of the Institute for Fiscal Studies.

He says that the tax system 'is not and was not, even before the recent changes, more generous to people buying to let'.

Johnson says this is due to landlords having to pay Capital Gains Tax when they sell a property as well as paying income tax on their rental return.

The financial expert's viewpoint is shared by David Miles, a Professor of Financial Economics at Imperial College London and former member of the Bank of England’s Monetary Policy Committee, who spoke at last week’s Great Buy To Let Debate 2017.

Miles predicts that from April many landlords would have to charge 20-30% higher rents in order to get the returns they are currently achieving. 

The RLA warns that the incoming policy risks 'considerable hardship' for tenants based on 'false assumptions'.

“It is troubling that Ministers have not published any evidence to back up their assertions that landlords are taxed less heavily than home owners. This is no way to make policy," says RLA chairman Alan Ward.

“We call on the Government to use the Budget this week to halt its planned tax changes which will do little to provide the new homes to rent they claim to want.”  

*Graham Norwood is on annual leave, returning Wednesday March 8. Conor Shilling will be undertaking editorial duties in his absence. Please send any press enquiries to press@lettingagenttoday.co.uk.

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    Good on them. Every trade body related to lettings needs to be applying considerable pressure here, I doubt that anyone in this industry would feel other than agreement with the above. The 3% stamp duty surcharge has already well & truly burst the BTL bubble ... if it really needed bursting as Gavin Barwell has said it did ... so its time to stop else rents will go up. I suspect that if this new tax does come in then agents will lose landlords unless they can prove themselves able to push rents up by around 10% per annum, to offset the landlords cost increase/income reduction.

  • Mark Hempshell

    Basically the explanation is this: We can see you're making money - we want some of it.

  • Daniel Latto

    This is going to be so detrimental to those tenants at the bottom end of the market who are also having to cope with significant inflation costs for basics like food and energy.

    A disaster in the making. Which will then be blamed on landlords again.

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    I would imagine that the Treasury advised the Govt. that they need to raise taxes.

    The Govt. told them not to raise the basic rate of tax as that would be too sensible/politically difficult and to come up with another way of raising taxes.

    The Treasury suggested this tax but didn't recommend it as it would push up rents for young people but the Govt. said don't worry about that we will spin it as helping tenants and hurting Wilson type landlords and the Guardian will lap it up.

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