Keeping the momentum going against Section 24

Keeping the momentum going against Section 24

9:29 AM, 13th December 2016, About 6 years ago 61

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I have decided to adopt a policy of making myself a complete pain in the backside and try to create as much noise around this subject as possible. Not sure it will work but it’s better than sitting around waiting for the inevitable.momentum

I have written to my local MP Caroline Dineage and have received the following response. I was wondering if anybody, who knows more about the subject than I do, could help me to fashion my next response to what I consider to be a bog standard misinformed piece of nonsense. I would like to go back with as much fact as possible to argue against each of her points. I can do the research and thinking on my own but 10,000 heads are better than one and wondered if anybody had any ideas or information that dispels the figures/information she is quoting?

I have also written to each member of the select committee on housing which met last week and will be responding to what I strongly suspect will be a very similar email reply from each of them:

“Thank you for your e-mail. I am very sorry for my error in sending a response to you regarding letting agent fees rather than mortgage interest relief. I have been receiving a great deal of correspondence on these two issues and inadvertently confused your e-mail with another.

As a former business-owner myself, I am passionate about helping small businesses thrive and fully appreciate your concerns about this policy proposal for the viability of your business.

The reason for these reforms is that the Government feels that the interests of the professional rented sector need to be balanced against the wider interests of the economy, including home ownership rates, a fairer tax system and mitigating against any future risks.

The current tax system supports landlords over and above ordinary homeowners, with tax relief particularly benefiting wealthier landlords with larger incomes. Every £1 of finance cost they incur allows them to pay 40p or 45p less tax.

The Changes to Mortgage Interest Relief do not tax landlords on turnover as opposed to profit. Rather, they remove mortgage interest from what is qualified as ‘allowable expenses’. I think it is important to note that maintenance and repairs, along with agents’ fees, legal fees, insurance, utilities, and service charges, are all still ‘allowable expenses’ and thus still tax deductible.

I appreciate you feel this could cause many private rental businesses to fold, but I would stress that less than 1 in 5 individual landlords are expected to pay more tax as a result of the restriction to Mortgage Tax Relief. Furthermore, I would assure you that this change is being introduced gradually from April 2017 over 4 years, giving landlords time to plan for and adjust to these changes.

While I appreciate you might find this response disappointing, I hope it goes some way to explaining the Government rationale on this issue.

Thank you once again for taking the time to write to me on this important issue.

Kind regards

Any guidance, info, statistics, quotes, etc. to make it harder to argue against us would be very much appreciated.




Neil Patterson View Profile

9:33 AM, 13th December 2016, About 6 years ago

Hi Pam,

Keep up the fight and you might want to do an article search on here typing in Section24 as there will be so much to help and support you 🙂

The even better news is that the research has been done for you and is in one easy place.

Please see >>

"Section 24 of the Finance (No. 2) Act 2015: “the unjust legislation that will make the UK housing crisis much worse.”

I would like to thank all of those who have contributed to this report, which I hope will have a significant impact in our campaign to reverse this insane legislation.

With the publication of this report we call on the Government in the Autumn Statement to take what might be the last opportunity to remove this legislation from the statute books. Similar legislation in Ireland has been seen to have been a mistake and is currently being repealed – and we call on the Government to repeal the UK incarnation of this before it causes more damage than it already has done.

As readers/members of Property118 it is incumbent on us all to now to send this report to as many people as we can – to our MPs, to councillors, to any people we know who may have some influence. If this buy-to-let tax change begins to be implemented, as planned, from April 2017, landlords, tenants, letting agents, councils and so on are all going to be in the firing line. There is however time to reverse it now and we should all be making us much noise as we can to get it repealed.

When you write your emails with the report attached, it is worth pointing out that there is an executive summary and expert opinions pointing out how wrong this tax change is at the beginning of the report. You might also point people to passages that will be resonant for them. For example, if you are writing to your local councillor or the head of your local council you might want to point to the sections on how this is going to massively exacerbate the homelessness problems they currently face, as tenants on benefits are evicted to be replaced with working tenants who can pay more (as landlords have to maximise rents as far as possible to pay the tax on fictitious income).

To give a few further pointers, you might refer people especially to Section 19 where there is a table comparing different housing providers and their tax treatment – there is a very striking table which illustrates the injustice of this s24. Section 9 will also be of interest to many as the retroactive nature of s24 has not been given the attention it merits. It can be mentioned in this context that the Irish legislation in 1998 was not retroactive and still caused rents to increase 50% in three years. The case studies in Sections 3-4 are also particularly important in showing the dramatic and incredible tax increases for many portfolio landlords who are providing essential rented accommodation but who will not be able to for much longer.

The report is meant as a tool for us to use now to get the message across to everyone we can think of who has influence and/or who has the means to spread the message far and wide.

Good luck! We are in this together.

Dr Rosalind Beck"

Dr Monty Drawbridge

11:36 AM, 13th December 2016, About 6 years ago

You say that "Every £1 of finance cost they incur allows them to pay 40p or 45p less tax" as if it is some kind of anomaly.

As someone who has run a business you will understand that every £1 of finance cost a landlord incurs is exactly £1 less profit that they make. That is why they don't pay any tax on that £1 which they give to the bank. It is not a peculiarly generous relief. That £1 is not theirs to keep. It is the basic principle of paying tax on profit which applies to all businesses.

Home owners (including landlords who own and live in their own home) do not get relief on their mortgage costs because they are not running a business - they have purchased the property for their own use, rather than to provide it for others to live in. Homeowners don't get relief on the price of their car, pcs, telephone, transport, utilities, property rental costs, council tax, gardener, maintenance ... anything in fact. Because they are not running a business. Owner occupiers are the end beneficiary.

terry sullivan

11:46 AM, 13th December 2016, About 6 years ago

typical MP--clueless but worse than that--totally in thrall to the party! why does politics only attract troughers?

Dr Monty Drawbridge

11:49 AM, 13th December 2016, About 6 years ago

I should add that my comment above is worded to the MP - not the OP!

terry sullivan

11:53 AM, 13th December 2016, About 6 years ago

a question--i have 2 HMOs--does that count as a commercial let?

Darlington Landlord

12:17 PM, 13th December 2016, About 6 years ago

Hi Pam
Its also worth pointing out that landlords cannot offset other income against mortgage interest to reduce their tax bill which is allowable in other countries. Mortgage interest is only deductable from rental income.

Simon Williams

12:23 PM, 13th December 2016, About 6 years ago

I love the part about "I assure you this change is being brought in gradually etc". It's a bit like a doctor telling a patient not to worry too much about their cancer diagnosis, because the increase in pain will be gradual and they will still have about 4 years to plan their affairs before they die.

Of course, we mustn't forget the other changes too - stamp duty, discrimination on CGT, loss of wear and tear allowance. No transition periods for any of those things.

Everyone has their own list of preferred points. Here are a few of mine:

- the notion that only 1 in 5 landlords will be effected is Treasury dishonesty. Firstly, many lower rate tax payer landlords will in future become higher rate landlords because mortgage interest has to be ignored at the front end of the tax calculation. MPs just don't get this. Second, I suspect many of the landlords who have no mortgage comprise the one-off "accidental landlord" who has a buy to let simply because they inherited their deceased parent's bungalow etc. By contrast, most serious portfolio landlords use debt financing because gearing is an essential tool for expansion in any area of business. Therefore the actual number of PROPERTIES affected by these proposals is likely to be far higher than 1 in 5 of all rentals. And that means a massive potential impact on Britain's 4 million tenants. A perfect storm of under-supply is brewing - especially when base rates eventually rise.

- the "current system" manifestly does not favour landlords over other property purchasers. The IFS nailed that particular lie a long time ago.

- if the government is worried that buy to let is a risk to the economy due to possible landlord default in the event of a future down-turn, drastically increasing our taxes isn't going to be terribly helpful. In any event, buy to let has demonstrated in the last 2 economic down-turns that it is in fact highly resilient to down-turns, not least because more people choose the safe-haven of renting when they feel their jobs are at greater risk. In Germany, nearly 50% of properties are in the private rented sector (mainly to smaller landlords) and their very large PRS has never been a problem to economic stability. If there is a worry, you manage it by prudential regulation of lending.

- In most major European countries, landlords have always been able to deduct mortgage interest. The UK's pre-section 24 position was just normal - not some terribly generous tax break that us Brit landlords were lucky to have. Indeed, in most European countries, tax treatment of landlords is much more favourable than in the UK e.g. in Germany where all gains on buy to let are tax free after 10 years. If we want stable rents and decent supply, we must encourage investment; not do everything to discourage it. That's one lesson the government obviously refuses to learn from continental Europe.

- In all other areas of economic activity, debt costs are tax deductible. It is indeed ironic that a company that borrows to buy a new machine to manufacture land mines that blows the legs off soldiers and civilians, is perfectly entitled to claim tax relief on the loan, but where a landlord wants to invest in providing much needed rental accommodation, this is apparently socially unworthy and should be penalised.

- I believe that at the heart of the attack on landlords is the notion that what we are doing is essentially economically useless; is inflationary and speculative and just captures a whole generation of young people who would like to buy but can't because us landlords have snaffled all the properties. It's essentially a Marxist theory of renting and much admired by Generation Rent. So let's deal with some facts:

- the great majority of people who rent in 2016, do so because their life circumstances are insufficiently settled to merit any other form of tenure. This includes a huge range of people - everyone from the French intern here in the UK to do a one year secondment before returning to France; the UK student who is obviously not going to be buying while they remain a student; the army of overseas workers who have no idea how long they will be in the UK for and need the kind of accommodation allowing them to leave on one months notice; the young Brit who doesn't know whether today's job in London will turn into next year's job in Birmingham; the young Brits who are experimenting with co-habitation for the first time and live with each other in a rental for a year or two before buying. All these people are vital to maintaining a flexible and effective economy and we are the people who provide them with accommodation that gives them the flexibility they need to find employment opportunity. Economically, that is an entirely legitimate and productive activity to be engaged in.

- Buy to let is not obviously inflationary. In Germany 49% rent, but property prices are lower. In the UK, there have been 5 major periods of rampant property price inflation over the last 50 years. In 3 out of 5 of those periods, buy-to-let didn't even exist. Over the last 30 years, 9 out of 10 purchases have NOT been buy to let. Yet the 1 in 10 that is gets prime billing as the virtual sole cause price inflation. I would actually argue that buy-to-let has massively encouraged further supply of housing. Why does a developer like Galliard try so hard to court the buy to let landlord? Because it is their up-front money which allows development to be kick-started into action. That means new flats not only for rental, but also for owner occupation and social rented housing that developers must build to get their planning permission.

- in 1965, the UK built about 350,000 new homes. Today we build about half the number. The problem is not demand from buy-to-let; it is the chronic under-supply. The government should stop slaying imaginary dragons.

Jennifer Aniston

12:54 PM, 13th December 2016, About 6 years ago

Reply to the comment left by "Simon Williams" at "13/12/2016 - 12:23":

If you don't mind Simon, I might just use your response verbatim in my reply to Caroline Dineage. Hope you don't mind. Very eloquently put and much more pertinent than anything I could cobble together.

Much appreciated


Simon Williams

13:54 PM, 13th December 2016, About 6 years ago

Pam, flattered that you might want to use any of it! Please feel free to do so. Good luck and best wishes. Simon

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