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17:25 PM, 22nd July 2020, About 4 years ago 28
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Landlords: don’t complain when you pay more tax than everyone else; you are, in fact, receiving a gift from Government.
There has been some controversy since the announcement of a Stamp Duty Land Tax (SDLT) ‘holiday’ a fortnight ago. In England and Northern Ireland, the house price point above which stamp duty is charged has been raised to £500,000 until the end of March 2021. The only people who will still pay stamp duty on property under £500,000 are landlords and second home buyers who still have to pay a 3% levy. This is a reduction from 5-8% applicable since 2016. In many parts of the country, because of low house prices this will equate to a saving of a few hundred pounds for purchases; in London up to £15,000 could be saved.
It is this latter point which has caused the controversy – initiated by Labour MP Thangham Debbonaire who called this a ‘huge bung to second homeowners and landlords’ https://www.landlordzone.co.uk/news/labour-calls-for-landlord-bung-stamp-duty-decision-to-be-reversed/ and it was debated by the Prime Minister and Keir Starmer in the House of Commons.
It has now been picked up by journalist Melissa York in a Times article where she declares first time buyers – many of whom are currently private tenants – are ‘furious’ as they are now being outbid by ‘opportunists.’ https://www.thetimes.co.uk/article/first-time-buyers-furious-as-landlords-and-investors-take-advantage-of-stamp-duty-holiday-9h3mp2tjt No evidence is provided of such competition or outbidding; in fact, landlords pay 1% less on average than first-time buyers, presumably because we are experienced at negotiating prices down.
This kind of biased, emotive language is no longer rare in the Times or other newspapers, but the anti-landlord stance in the Times has been unexpected in recent years. It was less surprising from the Guardian; something I have critiqued in the past. https://www.property118.com/despicable-vehemently-anti-landlord-guardian-article/
As Frank Lawton has pointed out, in such cases of a presumed advocacy role https://capx.co/cancel-culture-in-whose-name/ some ‘risk attributing to sections of society far more radical views than they may in fact hold.’ This is true of some who presume to advocate for private tenants. They paint tenants as trod-upon victims, when the most recent English Housing Survey found 84% of private tenants are satisfied with their home; more than in the social sector.
In the Times article, in addition to using opinions expressed in tweets as supporting evidence York provides an anecdote from her friend and colleague at the paper – ‘a financial whizz’ – who believes her plans have been scuppered by landlords now only having to pay a 3% levy on the value of fought-over property. However, the evidence in the article points to lender requirements for the deposit and suitable secure employment being the main obstacle for first-time buyers.
The fact is that, as we know, many landlords would not consider purchasing another buy-to-let under the post-2016 regime. We object on principle to paying what can amount to £15,000 more in upfront purchase costs; this would mean risking a double hit if property prices drop as seems likely.
So Debbonaire, York and the latter’s angry sources on Twitter expose a twisted logic if they think taxing landlords less but still more than everyone else is a spur to action.
As we all know, an earlier example of this was the invidious ‘Alice in Wonderland’ tax called ‘Section 24’. https://www.property118.com/wp-content/uploads/2016/10/6G0YKMd1Wf.pdf which disallowed landlords’ finance costs (usually the biggest expense in the business). Because the Government misleadingly called it a ‘tax relief’ their withdrawal of it was made easier – as though they were no longer giving a relief rather than disallowing a legitimate cost. The language of ‘giving’ rather than ‘taking’ led to calls from MPs as disparate as the Conservative MP Neil O’Brien https://www.conservativehome.com/localgovernment/2018/07/rosalind-beck-the-conservative-governments-attack-on-private-landlords-is-misguided.html and the Labour MP, Siobhain McDonagh, https://www.property118.com/why-does-labour-want-to-force-out-tenants-on-benefits-to-make-room-for-tory-owner-occupiers/82058/ for landlords to receive even less of this ‘relief’ (that is, to disallow more legitimate expenses). Whether this is based on ignorance or deliberate sophistry is unclear.
The allegation in the Times of a bidding war taking place between landlords and first-time buyers also takes no account of the fact that If first time buyers bought now and house prices fell by perhaps 10 or 15% they would quickly lose all the deposit they had acquired/saved up for, possibly going into negative equity. If they are patient it may be less risky in a year or two. In any case, if landlords won the so-called bidding war, with a subsequent drop in values and having paid a large amount in stamp duty, it could take many years to break even; not exactly an incentive to buy.
What people like Debbonaire also don’t grasp when they assume landlords are going to be feverishly purchasing property is the wider picture. Private landlords have been hammered for years by the Conservative Government. In addition to the Section 24 levy landlords are also suffering the 5-month eviction ban which has been a gift to rogue tenants and cost landlords a potential average £4,000 where tenants are not paying. https://capx.co/landlords-are-taking-a-pummelling-from-the-coronavirus/ Once the eviction ban is over on the 24th of August further restrictions on being able to get property back are planned, https://capx.co/the-latest-rental-reprieve-is-another-kick-in-the-teeth-for-landlords/ with new time-wasting administrative measures to give tenants more time in houses where they may not be paying the rent. This will be followed by a permanent effective ban on many evictions, which the planned abolition of Section 21 constitutes.
Given this context of a hostile tax and regulatory environment, anyone who thinks the ‘stamp duty holiday’ will persuade people to get into or extend their rental business is ill-informed.
To make matters worse, we might be dealt a further blow with a higher Capital Gains Tax; the Chancellor has asked the Office of Tax Simplification to conduct a review of CGT. Already, landlords are not only stung when buying but also when selling, as the only category to pay 28% CGT, with other investors paying 18%. This acts as a huge disincentive to sell.
If the Government decides to increase it to 40% or 45% as the Institute of Fiscal Studies wants, it will be a long time before much of that tax filters through, apart from a possible burst of activity if notice is given of its implementation. If CGT is increased for landlords, many will hold on to properties hoping in 10 years or so, rates will revert. Philip Booth at the Institute of Economic Affairs has said the best outcome would be to scrap the tax altogether. Abolish capital gains tax and start all over again, think tank urges
This is unlikely, but hopefully, the OTS will recommend a true simplification of the tax and more equitable treatment – one idea would be to introduce an ‘across the board’ rate of perhaps 10%. In an ideal world, this would include all property sellers as that is the only fair system. The Government would be terrified of the political fallout of such a move, however.
A more acceptable option would be to bring back ‘taper relief,’ abolished by Alistair Darling in 2008. This type of relief is still available in countries such as Germany and it means that for each year a property is owned and let out, there is a reduction in CGT, until after about 10 years there is no CGT to pay. The idea behind it is that this discourages people from ‘flipping’ and trying to turn a fast buck and instead encourages them to let out homes for longer periods. Implicit in this is the idea that renting out homes to those who need them should be incentivised; instead of the more recent UK Government’s approach of scapegoating landlords as though providing homes is the Devil’s work.
Given a wider remit, following on from the CGT review, the OTS could also recommend going back to the long-standing rate of 1% stamp duty for all. Coupled with lower CGT rates this would stimulate transactions and bring in much-needed cash, whilst not being too onerous for anyone.
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I wasn't worried until I tried to sell?
Steven
9:01 AM, 23rd July 2020, About 4 years ago
Landlord bashing is driven by a desire of the have nots to bitch against the haves. It's the same reason people vote Labour. The have nots (speaking as someone who once was one, in fact less than not) they only see it through their prism, which is usually one of inexperience driving in their eyes a simple truth. The truth is rarely simple, as we know.
Your final para I wholly agree with (as I do the rest of your article) - tax less and you will receive more; tax more and you will receive less. Labour proved that in spades in the 1970's. Sadly our politicians are driven less by common sense and more by "what will they think? What can we get away with?" Oh for an enlightened, former business owning, benign dictator with some balls...
Question Everything
10:29 AM, 23rd July 2020, About 4 years ago
Very good synopsis and I agree whole heartedly.
The problem is, "why"? Why all the propaganda, smear campaigns, scam taxes and double binds? (look into the psychology that groups those behaviours together)
We know the data doesn't add up, and we do our best to scream it from the roof-tops but it goes unheard. The public likes the horror-story, not the facts. The facts are boring. Even if we're able to prove it, our personalities are so smeared that no-one will care much, we can't plead sympathy or empathy, so what do you suppose we can do? How do you fight an honest fight against a corrupt system that has no virtue or integrity?
We are still looking at this by fighting directly against the lies, "stupidity", fabrications and incompetence. This just tires us out and and turns into air-time and a good soap opera, especially on Radio 4. (No disrespect to Rosalind's post, it is very important to have these things clarified)
I want to offer a view that .gov is not incompetent or "stupid" and that they know exactly what they are doing. I want us to think about what the end goal is. Of course you might say that they are too stupid and short sighted to have an end goal, but again, this is us being fooled into thinking they are stupid. The reverse is really true, they think we are stupid and so they don't care to offer rational or reasonable reasons for their actions, knowing that not enough people will question them anyway. This is their disdain for us.
We need to change focus, we need to pull back the mask of this system so we are approaching it head-on, not by being the cat chasing the string being pulled by a tormenting child.
.gov is not the people who fein honesty on TV, it is the mechanism that operates behind them. It is the mechanism that uses the left or right for it's own ends. Do we really thing we have a Tory party in power? Seriously, what Tory party would destroy small business? Puppet T.May even stated she didn't know why Self-employed should not be taxed the same way PAYE workers are. Yes, sounds stupid to those who know, but not to the PAYE'rs who are the majority. May is not clever, fine, but those who told her to say that are. Just look at how scared Boris is these days, he is not the vision of grand pompousness he was a few months ago. It doesn't matter who is in "power", they all get as smeared and ruined eventually. The point thereby being that none of them get powerful enough to do what they want outside of .govs agenda.
We do need eloquent and poignant mappings of the situation that Rosalind has done, but this is only for foundations when attacked on fabrications. We need to have a different game plan if we are going to gain any territory.
We need to create and anti-government campaign, and we need to create a pro-landlord campaign. Both seem ridiculous, I know, but when the TFL started to pump through the PA in their tube stations about how good their lines are operating, they started to get considerably less complaints. Not necessarily the truth, but this is how it works.
I don't have all the answers on how to action this, I am just making a point that we will go nowhere unless we realise what we are really up against. We have been played like this for generations, and the current state of world affairs is a perfect analogy for what I am trying to say.
Mick Roberts
10:43 AM, 23rd July 2020, About 4 years ago
I'd forgot about Taper relief, yes that would make some Landlords keep for longer, hence reducing the homeless numbers.
And I think the optimum tax rate is 11%, which would bring in the most tax, as top earning business owners would think I'll have a bit of that, I'll keep earning & I won't put my company ashore. Happy to be corrected on the 11%.
And yes, Labour tax was it in the 70's? Everyone cleared off overseas & that has kept up.
Beaver
11:28 AM, 23rd July 2020, About 4 years ago
Reply to the comment left by Mick Roberts at 23/07/2020 - 10:43
I don't know whether 11% is the optimum, but I think you have a point about taking your company offshore. At the moment, since the recent changes to entrepreneurs relief, there is an incentive to get your company offshore. I can't see how that is going to produce a recovery in the economy; the recovery isn't going to come from the likes of Amazon as even though they've done really well from lock-down they declare much of their tax off-shore anyway.
Simon Williams
13:41 PM, 23rd July 2020, About 4 years ago
The simple truth is that if you encourage more landlords to buy, you will encourage more developers to build. That means more homes coming on stream to purchase for every type of buyer. Furthermore, landlords have been very good at making efficient use of existing stock and they are the major clients at property auctions bringing back disused or dilapidated properties into the system and then renting them out. Supply levels actually benefit from landlord investment.
steve p
4:52 AM, 24th July 2020, About 4 years ago
If they up the rate of cgt to 40% people will just hold on to properties till they die which then negates the cgt altogether
Old Mrs Landlord
10:26 AM, 24th July 2020, About 4 years ago
Question Everything has coined the perfect description of those taxes on fictitious profits S.24 and CGT, which he describes as "scam taxes". The iniquitous removal of taper relief means much of the CGT landlords pay is simply a tax on inflation, the fall in the purchasing power of the money the landlord paid for the property. In real terms the properties we ourselves rent out have barely gained anything in the twelve or more years we have owned them. These taxes, coupled with the sustained vilification of landlords which provides such good material for the left-wing media, feed an imagined sense of injustice and drive a wedge between the generations which the government seems to think is to their benefit as tenants greatly outnumber landlords and, by scapegoating landlords, it deflects attention from the failures of successive governments to provide sufficient social housing. However, far from their anti-landlord measures garnering the votes of the young, they are driving them into the arms of the more extreme sections of the left and, what is worse, dividing the generations by feeding a sense of grievance and injustice in the younger generations who blame everything on their grandparents' generation. How can politicians be so blind to the social problems they are creating?
Steven
11:19 AM, 24th July 2020, About 4 years ago
Reply to the comment left by steve p at 24/07/2020 - 04:52Totally right Steve P - it was 40% once upon a time. So, Rishi and the Tax Simplification team, why was it reduced in the meantime? You'll find the answer in the research that was carried out before the reduction (hint: because you'll collect more...). Go on, Rishi, increase it to 40%; no, to hell with it, increase it to 100%, the effect will be the same - no one will sell, the property market will stall (sorry, stall even more than it will do after the stamp duty easement is removed - Rishi, there's a clue there isn't there.) It will beggar belief if so called intelligent people who can work out that reducing tax (stamp duty, vat) successfully encourages economic activity end up deciding an increase in tax (any tax, not just CGT)will be a good idea. Let's see, but you can see some enthusiastic fresh out of university tax researcher, who has never been a landlord, never run a business, never considered economic theory, but full of idealistic fervour thinking "hang on, companies pay Corp Tax, like individuals pay Income tax, but pay Corp Tax on gains, unlike individuals who pay CGT. That's not right, it will merely drive the same people Mark Carney identified as posing such a terrible risk to the UK economy, to set up companies. Shocking. That needs to be stopped. Rishi, I suggest Companies pay CGT at the same rate as individuals." Twat. OR "Rishi, why not abolish CGT and just say people will pay Income tax on the gain as if it were a slug of income in that year; that way the rich will pay at 45% and the poor at 0 or 20%". Looks great, Rishi's a political hero to the poor, but the policy still b**gers the economy (oh and landlords get another kicking, whose s24 turnover is classed as income of course, but who cares about them. It's clear that landlord's accrued "wealth" is being targeted to pay by stealth tax Gordon Brown's creation of 1m new jobs, all in the public sector...)
Question Everything
12:52 PM, 24th July 2020, About 4 years ago
Reply to the comment left by Old Mrs Landlord at 24/07/2020 - 10:26
Old Mrs Landlord, has outlined perfectly what is going on, but again, the question comes. "How can politicians be so blind to the social problems they are creating?"
PLEASE PEOPLE, see this as by design. I'm not saying ALL politicians are corrupt (although i bet they are), what I am saying is there is a deliberate agenda to create exactly what Old Mrs Landlord has so well described. It is not just the UK, it is in the US and many other places. We need to wake up to this, I am not being "conspiratorial" I am trying to make people join the dots and see the corruption.
Why is Shelter mostly funded by local government to get rid of landlords? The millions they get funded with would be better spent on building homes for the homeless no? This seems like a "stupid" thing, but the idea of stupidity is a red-herring. This is pure corruption. It is a covert operation, where no-one other than those who are adversely affected (i.e. us) can see it. The guise of "public good", has been the most effective tool for control and corruption in history. I am not exaggerating, and .gov has used this time and time again with a very high success rate.
Why are we being forced to wear masks when the Association of American Surgeons have published that it has no effect whatsoever???
https://aapsonline.org/mask-facts/
Politicians, due to their ego's, and career desires, are doing what they are told to do. If they went against the grain they would lose their job. The politicians are being used as puppets and have been for years and years. Unfortunately they are willing puppets because they have as much disdain for the people as those who are using them.
As a further point on Old Mrs Landlord's taxation on inflation, the house prices are actually even much less than she has shown. GBP has fallen some 25% against USD in 10 years, so the true value is really much less. You need to understand that as USD is the world reserve currency, this is the measure of your wealth.
Gold has hit its all-time-high again today, the Gold price is effectively the inverse of the value of the dollar. Think about that in reference to GBP losing 25% against USD.
Buy gold, silver and bitcoin and get yourself a little out of reach of parasitic .gov.
Or at least pay down your debt on your mortgages if you can, so at least you are less at the mercy of the political agenda.
Jay James
14:50 PM, 24th July 2020, About 4 years ago
Reply to the comment left by Question Everything at 24/07/2020 - 12:52
Your final sentence is spot on.