Government plots raid on landlords to plug £50bn black hole

Government plots raid on landlords to plug £50bn black hole

10:34 AM, 7th November 2022, About 4 weeks ago 44

Text Size

The government will target landlords in a bid to plug a £50bn hole in the country’s finances, reports reveal.

The move could see landlords losing thousands of pounds when selling their property under proposals which will come as a fresh tax blow for investors.

One report says that landlords could face an £8,400 squeeze in capital gains.

The revelation of the plan comes after thousands of landlords have already cashed in and left the PRS this year after facing increasing legislation, punitive tax changes, the potential of section 21 being abolished and having to upgrade properties to potentially meet an EPC rating of C.

Those who have sold up have enjoyed years of house price growth – but the Government now looks set to take a bigger slice of the profits made when selling.

Increasing the headline rate of CGT

That’s because the Chancellor, Jeremy Hunt, is looking at increasing the headline rate of CGT – and shaking up allowances.

Experts say that if capital gains were to be aligned with income tax, which has been recommended previously by a Government tax advisory body, then a higher rate landlord would not pay the current 28% on any gains, but 40%.

One analysis by tax accountants Blick Rothenberg has calculated that the move would see a higher-rate landlord paying an extra £8,400 in tax.

Their calculation is based on buying a property in 2017 for £226,000 and selling it today for £296,000 to achieve a gain of £70,000.

The tax firm points out that a second homeowner who bought a more expensive property would be hit even harder under the proposals.

‘Landlords are considering their options in the property market’

The firm’s Nimesh Shah told the Daily Telegraph: “Many individual landlords are considering their options in the property market, given increasing mortgage costs, and the compounded effect of the mortgage interest relief restriction introduced in 2017.

“With the suggestion that landlords will be hit with significantly higher capital gains tax, investors will need to seriously consider selling their properties before any rate rise takes effect to ‘lock-in’ the current highest rate of capital gains tax of 28pc.”

Other proposals being discussed include raising the rates on dividends or reducing the £2,000 allowance.

The Government’s plan would be a blow to those landlords who have been relying on the capital appreciation of their investment property or holiday let as a pension plan.

Various news outlets say the plan could be unveiled as part of the Chancellor’s Autumn Statement.

It follows a move by Rishi Sunak in 2020 when he asked the Office for Tax Simplification to review capital gains tax in an effort to simplify the tax regime in the UK.



Comments

DSR

11:01 AM, 7th November 2022, About 4 weeks ago

FFS this is getting ridiculous.

If there is anyone NOT selling at the moment...a rethink is in order!

mark smith

11:04 AM, 7th November 2022, About 4 weeks ago

Or you could look at incorporation into your own Ltd Co, and then look to prune your portfolio.
Any CGT would be rolled-over into company shares and sales post-incorporation would attract Corp Tax only on any profit from the rebased MV at incorporation date.

Tetleys

11:16 AM, 7th November 2022, About 4 weeks ago

If you prune your portfolio and Corp Tax is only due on the profit above the incorporation value how does the incorporated equity get drawn out of the company ?

Old Mrs Landlord

11:18 AM, 7th November 2022, About 4 weeks ago

". . .the Government now looks to take a bigger slice of the profits made when selling." Many of us, however, will ask "What profits? Depending on timings of buying and selling, landlords in parts of the country have seen little or no capital appreciation over and above the rate of inflation since we purchased. We will be taxed not on actual real terms profits but on paper profits, that is money which buys much less now than when we bought the properties. Another stealth tax.

Coastal

11:24 AM, 7th November 2022, About 4 weeks ago

Potentially adding further fuel to the already 'at critical mass' rental homes shortage would be astonishing! Am more and more beginning to think the relentless attack on the PRS sector is part of a hidden agenda - surely our expert ministers and policy makers cannot be this incompetent?

DSR

11:38 AM, 7th November 2022, About 4 weeks ago

Reply to the comment left by mark smith at 07/11/2022 - 11:04
It's going to cost me to transfer into a Ltd co.
Corp Tax is looking likely to be hit also. In the interim HMRC will be flagged by yet another Ltd company being established, so the sniffer dogs will be out... more time spend trying to keep ahead of the tax game. It's becoming draining. Everyone loosing sight of the fact we rent property to PEOPLE.

Is this what its come to? Making all LL's feel like we now have to live up the the shifty, tax dodging companies headed by faceless con men 'lording over tenants to squeeze as much out of them as possible' ideology that's being continually pumped through the media?

For what? Kill of the small LL and it will be replaced by exactly that as the norm!

Ultimately this is not all about tax. Its about the way the PRS is being decimated to the point, I actually feel its time to just leave, in fact not leave - get out. There is a difference. a big difference.

You cant raise the rent, you cant evict a tenant, you cant get mortgage relief, more tax, little profit and yet higher fines and prosecution. The thought of ensuring my rental properties 'make the enviro grade' means that I'll be spending money making these properties BETTER that my own! No problem if the tenants can pay the increase over time, but they can't! Bloody madness.

Good landlords with perfectly fine houses are being made to feel criminalised for just renting out property. While this mantra continues nothing will change.

Like it or not we will all become those horrible LL's of the past - because the government is making us all behave that way just to survive.

York student landlord

11:41 AM, 7th November 2022, About 4 weeks ago

Reply to the comment left by mark smith at 07/11/2022 - 11:04
Hi Mark as you will know it’s not always as simple as that. There are thousands of landlords like me who bought houses 20 or 30 years ago and it’s impossible now to incorporate them because of the stamp duty and CGT implications. Because of the original purchase price compared to the current value (and lending) we are not eligible for any incorporation relief. I’ve looked into so many different ways of mitigating the effects of section 24 but in my own case our bank has advised that if I attempt to do this it will be classed as tax avoidance and they will close our accounts and Mortgages! The only way I can realistically mitigate the financial impact is to raise rents to the maximum that the market will stand and I’m in the process of doing that so that at least if there is a rent freeze they will be frozen at increased rates. I feel genuinely sorry for tenants that are having to pay the price of the government hammering of the PRS. I certainly don’t expect any sympathy, and I know landlords don’t get any, so all we can do is either deal with the constant barrage of challenges that the government throw at us or choose to sell up. For those of us that stick it out and are in it for the long run hopefully it will be worth all the stress.

Sanjeev Markanday

11:45 AM, 7th November 2022, About 4 weeks ago

Reply to the comment left by mark smith at 07/11/2022 - 11:04
Not a viable option if you only have 1 or 2 properties. Viable option for portfolio landlords

Annie Landlord

12:02 PM, 7th November 2022, About 4 weeks ago

Reply to the comment left by Old Mrs Landlord at 07/11/2022 - 11:18
Exactly this! I have been selling one a year. Some sold well, others less so. The one I'm hanging on to is a super property, but the entire area has seen very little capital appreciation in the last 10 years.

Kulasmiley

12:10 PM, 7th November 2022, About 4 weeks ago

Reply to the comment left by DSR at 07/11/2022 - 11:38
Without a doubt it will cost to set up in a LTD Co as Mark Smith suggests. The big question is

"How much (many £1,000's I would think) will it cost if you do/we don't set up in a LTD Co?"

1 2 3 4 5

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now