industry news
NLA demands changes to new buy to let tax
More than four hundred-thousand landlords (22 per cent) who pay the basic rate of tax will be forced into a higher tax bracket from April next year as planned changes to landlord taxation come in to force. The changes, due to be fully phased in
by 2021, mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income. Currently, mortgage interest payments can be deducted as a business cost, including insurance premiums, letting agent fees and maintenance and property repair costs.
“When the Government announced these changes, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh”
Richard Lambert, CEO at NLA While 440,000 basic-rate tax payers will
be forced into a higher bracket, all landlords could be at risk of seeing their tax liability increase regardless of their existing rate of tax, with landlords in Central London (31 per cent), the East of England (30 per cent), and the West Midlands (28 per cent) particularly hit. The amount by which landlords will
be affected depends on their personal circumstances, including whether or not they generate income from any other sources. Landlords’ tax liability will increase depending on their existing annual mortgage interest payments, which are broken down by portfolio size below. The sums vary from £3,600 on a single
property, £18,200 on five-10 properties and £38,000 for 20 or more properties. Richard Lambert, chief executive officer at
the National Landlords Association (NLA), said: “When the Government announced these changes last year, it claimed they would only hit a small proportion of higher- rate tax payers. We now know that is complete tosh.” He warned that unless changes were made landlords faced an impossible decision on whether to increase rents or to sell-up, forcing their tenants to find a new home.
Trade bodies react to Shelter report
Shelter’s Living Home Standard report was a study of public perceptions and did not provide “hard evidence” into the housing stock, representatives of the National Housing Federation (NHF) and the National Landlords Association (NLA) have insisted. The charity’s report, which polled
1,961people across Britain, found that 66 per cent of housing association, 68 per cent of local authority, and 69 per cent of private rented homes were not up to scratch. HMM can reveal the survey examined 152
LA-rented homes (104 failed, 48 passed), 127 HA-rented homes (84 failed, 43 passed) and 427 PRS homes (293 failed, 134 passed). In August the NHF claimed HAs provided
“some of the best homes” based on its own report which looked into factors such as energy efficiency, tenant satisfaction and neighbourhood. Henry Gregg, assistant director of
communications and campaigns at the NHF, said: “These findings give an interesting insight into what the nation considers to be an acceptable home, but ultimately the results are attitudinal and based on the perceptions of respondents. “Our research shows that housing
association homes are better quality and more energy efficient than those in the private rented sector. They are also more affordable and provide tenancies which are more secure. “Indeed, across all tenures housing
association repair costs are the lowest, with costs in the private rented sector almost double.” Richard Lambert, CEO at the NLA, said:
“Shelter’s Living Homes Standard defines what people aspire to in a home, rather than a practical housing standard based on hard evidence. In reality, many people are living happily in homes which do not meet their criteria.” “Standards are continuing to improve in the
PRS. According to the most recent English Housing Survey, the proportion of ‘non- decent’ properties in the private sector is actually declining, and fell by 18 per cent between 2006 and 2014. “Nevertheless, more can be done to
improve private renting in the UK, but the best way to do this is through incentivising the good work of landlords, rather than applying yet more regulations and discouraging investment in buy-to-let.”
Private landlords lose legal challenge over tax changes
P
rivate landlords have warned rents will rise after they failed in their bid to force a judicial review of the
Government’s controversial decision to change how mortgage interest payments are accounted for. Buy to let investors and landlords will be
particularly affected by the changes which stop mortgage interest being a claimable business expense. It means landlords with mortgages will pay tax on their turnover rather than their profit. Steve Bolton and Chris Cooper went to the
High Court demanding a judicial review but the judge refused them leave to proceed and the co-claimants have confirmed they are not going to appeal. In a joint statement after the hearing,
Bolton and Cooper said they were “outraged” by the decision, adding: “It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24 of the Finance Act.” “Sadly it will be tenants who are hit the
hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation. For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market.
6 | HMM November 2016 |
www.housingmmonline.co.uk Unfair
“Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.” A survey of landlords by the Residential
Landlords Association revealed the changes would lead to higher rents for tenants, repair and maintenance standards slipping and the supply of private rented housing would stagnate. David Smith, policy director for the
Residential Landlords Association (RLA) said: “Having provided support for this case, the RLA is disappointed it will not progress to a full judicial review. The campaign to seek changes must now focus on a political path.” “The Autumn Statement provides an
important opportunity for the Government to make changes that will support the development of the new homes to rent the country desperately needs,” he added. He said: “Whilst it is now being judged as a legal tax that doesn’t make it a just or fair tax and the Government still doesn’t seem to fully understand the impact it will have on housing supply and economic activity. The real losers with be the tenants as living costs continue to increase.”
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