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

Whilst it's not too late to move properties to a company wrapper, this is would be a further raid on the most highly taxed sole traders.

Individual PRS landlords already
- pay an additional 3% SDLT when they buy,
- cannot claim their full finance costs against their income,
- pay an additional 8% GCT when they sell & have to pay it within 2 months of the sale
- do not qualify for rollover relief on sale and reinvestment
- do not qualify for business asset disposal relief (formerly entrepreneur's relief)
- cannot claim pension contribution relief against their rental income

In addition, we have seen the insidious rise of taxation by local authorities as they introduce questionable licencing schemes and charge council tax on individual HMO rooms.

And, if all this is killing you, if you leave assets of over £375,000 they can be taxed at 40% IHT when you die.

Unlike recent Tory policy (and leadership), tax planning looks at time scales of years, not months.

If, like me, you have upgraded homes over the years adding your old home to the portfolio, and planned to reduce your CGT by using the Primary residence relief, you have already seen this cut from 3 years to 18 months and then 9 months. Switching to a company wrapper would deny me use the remaining relief, together with my annual allowance (and the other half's).

I am already reducing my portfolio, so the time, cost and admin of restructuring does not appeal.
With allowances already frozen, it is cold comfort that I can save tax by selling into a falling market, knowing that, in addition to reduced proceeds, I will either be shrinking the PRS supply, or be selling to an investor who like their agent will care more about the bottom line than building a sustainable relationship with their tenants.

Oh, and on what I have in company ownership, I am already paying the 1.25% increased dividend tax rates.

The PM claims that he supports small business, clearly the PRS does not qualify.

Reply to the comment left by York student landlord at 07/11/2022 - 11:41
Not sure you might be right about this. I suggest you have a word with Mark and his company it might be that you don’t know what you don’t know. Now admittedly you’ll have to pay for his advice but it could well be money well spent.

PS I make no commission for the statement

Reply to the comment left by John Parkinson at 07/11/2022 - 12:19
Hi John. I’ve looked into this in great detail over the last 12 months and consulted with five different companies that specialise in incorporating and restructuring property portfolios. Some have been paid consultations and some are introductory but none of them have come up with any solutions that are either appropriate in my position or acceptable by my bank. I think incorporation is a realistic solution for some but not for those of us that have held properties for many years and highly leveraged

Tbh this government has gone far in the eyes of landlords. Can't the think-tank see this? If the PRS is selling up now, adding more legislation will make more landlords sell up adding properties ( that dont sell) to the market and is going to have householders living in squalid conditions that they will then own. Who will they call to fix the washing machine, lights epc equivalent and will they add new fire safety protection.

As for CGT increases. I dont think any of my properties have gained value, so although the government might not get much from my by way of CGT, IT HAS TAKEN AN UN - FAIR SHARE.
Rant over.

There have been so many housing ministers (over 20 in the last 20 years), guided by junior civil servants (many of whom probably rent), there is not much chance of a grown up, balanced, strategic approach to the PRS. Add to that the silo mentality; it's no wonder we are still waiting for the Government to publish new requirements for
- MEES/EPC
- HHSRS
- Decent Homes Standard
As interest rates rise to 15 year highs, S24 could have the same impact on sole trader PRS landlords as the recent LDI (liability driven investments) blow-up in the pension industry, which is still being felt with investment companies forced to sell properties at discounts of over 10%.
Many landlords have held their properties as long term savings to fund retirements and long term care costs.
With arrears expected to rise, plus a two year recession, further interest rate increases, EPC costs and abolition of S21 all on the horizon, only HMRC and Rightmove will benefit as landlords accelerate their exit plans.
It is this Government who will be guilty of deliberately making tenants homeless, due to lack of supply pushing rents even higher, not conscientious tax paying landlords.

To add fuel to the fire, what is to stop the Gov from setting corporation tax higher for companies that are classified as 'property' orientated and/or are perceived as being so?

Already Corp tax is heading upwards, exactly where to we'll hopefully know after the statement on the 17th. It's not beyond the realms of possibility that they decide to bring property company tax rates in line with CGT, whatever that ends up at.

Reply to the comment left by Tim Rogers at 07/11/2022 - 13:05
exactly - why jump our of the frying pan into the fire. Sunak says he wants to make the tax system easier (read into that as making it easier to take from you) so 'levelling up' Corp Tax to CGT level is the obvious step?

Pander to the left ideology of screwing everyone that owns anything (but just not your Eton mates/non dom wife), and its a vote winner.

LLs are bloody tax payers not tax avoiders by trade - but the government is making us so....

Reply to the comment left by York student landlord at 07/11/2022 - 11:41
Hi there is a solution please speak to property 118 thy can form a llp this will reduce the tax , lenders can’t chalking e this as it does not change ownership

Reply to the comment left by DSR at 07/11/2022 - 11:01
Not selling mine as I have no mortgage

Reply to the comment left by Helen Hedderman at 07/11/2022 - 14:15
Even so, but when you look at the possible tax implications, the cost of the EPC stuff to come, the risk with tenants not paying, the hassle you get your property back when you want it, SL (which I think will be put in everywhere as a LA cash cow), legislation, LL prosecution potential...

is it still worth It?