There’s been an angry reaction from across the lettings sector to the latest government tax threat to landlords.
The Times says the government would like to force landlords to pay National Insurance on profits from rental income. This would apparently raise some £2 billion for the Treasury. Landlords of course already pay income tax on profits from rent, although some charges can still be offset against this.
National Insurance is currently paid on earned income from the age of 16 to state pension age. It’s payable on income over £242 a week or self-employed profits of more than £12,570 a year. It’s taxed at 8% for employed people and 6% for self-employed people. For income and profits over £50,270 it’s taxed at 2%.
This is just the latest property tax threat floated over the summer, ahead of this autumn’s Budget. Stamp duty reform and capital gains tax on principal homes have also been suggested, all aimed at raising additional income.
But the NI proposal has aroused particular passion from the industry.
Ben Beadle, chief executive of the National Residential Landlords Association, says: “Further punitive tax hikes on the rental sector will lead only to rents going up, hitting the very households the Government wants to protect. It would come on top of last year’s increase to stamp duty on homes purchased to rent and proposals expecting landlords to pay up to £15,000 on energy efficiency improvements to properties.
“Analysis by Savills shows that up to one million new rental homes will be needed by 2031 to meet demand. Given this, the Chancellor should be using the tax system to encourage long term investment in new good quality rental housing. She should also heed the advice of the Committee on Fuel Poverty and reform the tax system to support investment in energy efficiency improvements.”
Shaun Moore, tax and financial planning expert at Quilter, comments: “The proposal … would be another significant blow to the buy-to-let sector, which has already been squeezed from all angles in recent years.
“Landlords have faced a raft of changes, from the reduction in mortgage interest relief to tighter regulations and higher borrowing costs, making it increasingly difficult for amateur landlords to operate profitably. On top of this, the abolition of ‘no-fault’ evictions under the Renters’ Rights Bill means landlords now face far greater challenges in regaining possession of their properties, adding another layer of complexity and risk to letting.
“Introducing an additional tax burden risks accelerating the exodus of landlords from the market, further reducing the supply of rental properties at a time when demand remains high. This imbalance will inevitably push rents even higher, worsening affordability for tenants and deepening the housing crisis. Similarly, the addition of NI would almost certainly be passed on to renters through higher rents, compounding the problem.”
This article is taken from Landlord Today