Arthur takes a look at more upcoming tax problems for landlords.
Over the past year, Arthur has reported on all sorts of problems for landlords, several of them have been tax problems. Unfortunately, we are here with more bad news.
Firstly, we have the continuing issues of the increased Stamp Duty. Unfortunately this doesn’t look set to be repealed any time soon despite a new Chancellor, Phillip Hammond, looking to shake things up in the wake of George Osborne’s departure and the Brexit vote.
Early indications show that the tax is wildly under-performing, with the Treasury receiving around half of what they believed they would in tax revenue. This could be down to the large decrease in house sales across the United Kingdom. The decrease has been down to several factors as well as new Stamp Duty rules, namely: the Brexit vote, uncertainty over the next Prime Minister and an uneasy economy. Furthermore, it remains to be seen what influence the election of Donald Trump will have. Clearly, Stamp Duty has caused tax problems for the Government as well as for landlords.
Buy-to-let Tax problems
The next in a long list of tax problems for landlords. In February 2017, changes to buy-to-let mortgage relief will come into effect. This means that landlords will no longer be able to deducted their mortgage interest when they work out their profits. In reality, this means that if you are a higher-rate tax payer you could end up paying around four times more in tax on your properties profits, something nobody wants. (check out an in-depth breakdown of how much you’ll pay).
What this means in reality is that landlords will probably be forced to up their rents to try and regain some of that lost profit. This will then place even more pressure on ‘Generation Rent’ as they struggle to make rent payments. Furthermore, because of these tax problems, smaller landlords may be forced out, meaning more property will end up in the hands of big businesses, increasing their influence and allowing them to dictate rental prices.
It really must be asked, who are these taxes benefiting? The Government is trying to increase tax during a difficult economic period, but it doesn’t appear to have been very well thought through. A lot of the new tax costs for landlords will be pushed onto the renters as landlords simply cannot afford to pay it. The renters will then not be able to afford the rent and suddenly you have an even worse housing crisis.
It remains to be seen whether either of these taxes will be changed or repealed…