Leading economist warns against short-term PRS tax raids ahead of Budget

Speculation about new tax grabs on the private rented sector (PRS) could inflict long-term harm on the economy, a leading economist has warned.

Paul Johnson, the former head of the Institute for Fiscal Studies, said talk of further taxes on landlords was ‘economically damaging’ and reflected ‘a lack of understanding about investors’.

His comments came during the latest episode of Listen Up Landlords, the National Residential Landlords Association’s (NRLA) podcast.

Mr Johnson was speaking with NRLA chief executive Ben Beadle and co-host Richard Blanco.

Landlords not under-taxed

Johnson, now Provost at The Queen’s College, Oxford, expressed frustration at what he sees as a piecemeal approach to housing taxation.

He said: “I think you need to think very carefully about how to tax housing and how to tax rental housing, and the first myth to bust is the idea that somehow landlords are under-taxed relative to owner-occupiers, which is complete nonsense.

“If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent.”

He urged ministers to develop a coherent, long-term plan for housing and property tax that would not change with every Budget.

Without such stability, he warned, uncertainty will persist and the PRS will continue to be seen as an easy target.

Abolish Stamp Duty

Mr Johnson also called for the abolition of stamp duty, describing it as ‘the worst tax we have’.

He added: “If I were chancellor for the day, I would abolish it.”

The economist also says there’s a ‘strong case’ for aligning Capital Gains Tax with income tax rates but fears the impact on inflation.

Tax strategy to help landlords

Ben Beadle said the government should take Mr Johnson’s words seriously as it prepares for the November Budget.

He explained: “Ahead of the Budget the government must heed Paul Johnson’s sage advice.

“Too often the way rental property is taxed is based on nothing more than topping up the coffers from one year to the next.

“Such knee jerk and short-term thinking is no way to run an economy.”

He added: “What is needed is a consistent tax strategy that gives responsible landlords the confidence to invest in the decent long-term homes for rent that so many people desperately need.”