Labour’s tax raid on landlords: A recipe for higher rents and housing chaos

Assuming normal VAT rules would apply. As stated above Landlords below the Vat threshold may or may not choose to register. Those that doe presumably would be able reclaim Vat paid to agents, contractors etc reducing the net tax take. Vat at 5% on rent would probably almost completely offset by tax reclaimed

A “rent tax” needn’t have this downside and could operate with a much lower (probably zero) threshold. With rates & thresholds set independently of any other taxes. No doubt like Section 24 will only be applicable to private unincorporated Landlords to make fair and level the playing field.

Land Securities is planning major sales of its office portfolio to fund its pivot toward housing development, which it believes will offer higher structural growth and lower volatility. The FTSE100 landlord plans to establish a £2bn+ residential platform by 2030, according to its latest results.

Grainger, PRS Reit, M&G Aviva, Lloyds ,et al are all committing to build to rent. The problem is that, apart form a near 50% presence in the PBSA (student) market, their existing, in construction and approved share of the market remains below 5% of supply.

As the Land Sec example shows, their plans are long term, and these operators tend to be cookie cutter, focussed on a specific tenant type.

Due to their smaller portfolios, many landlords have catered to a more varied cohort of tenants, and housing types, either by design or in response to changes in the market.

The large investors will act on a commercial basis, something smaller PRS landlords have shown reluctance to do, despite the example of local authorities, who have annual rent increases for their tenants built into their tenancies and approved by government.

Due to S24, many landlords now pay tax on their rental income at 40% and 45%, and even 60% (when they are caught in the £100K – £125K personal allowance trap).

Small PRS landlords selling down are currently bailing out the government who, like the Tories, keep accelerating tax collection by shortening payment periods or collecting tax in advance, as well as removing allowances and freezing thresholds, while raising tax rates.

Talking to my central London sales agent today, he said that 50% of his stock is from smaller landlords selling their rental properties, despite rents having risen up to 50% over the last 5 years. When I asked if he was selling any to landlords, I got the predictable “very few, if any”.

Liz Truss and Donald Trump both learned that the market is king, a lesson Starmer, Reeves and Rayner will learn the hard way. If they thought the winter fuel payments fiasco was a surprise, they will be in for a very rude awakening when falling PRS rental supply combined with the gap in delivery from BTR makes the current housing crisis look more like a shortage of sandwiches at M&S

Charging VAT would render the rental ‘business’ a real business and apart from increasing rents by 20% (or whatever) could have real opportunities for landlords – nothing for the tenant though.

However it is unlikely this would happen as if VAT would be levied then 1million+ landlords would have to register for VAT and currently it can take up to 3 months to get a VAT number.

Cant see NI being levied as you have to be a business (self employed) and it wouldn’t apply to LTD companies.

All in all another cock up idea

GlanACC may be right but that won’t stop this ghastly pile of humanoid detritus disguised as a government from turning gold into dust if they try hard enough!

Reply to the comment left by Blodwyn at 23/05/2025 – 12:09
He may be renting it to some of his Ukrainian “model” friends.

Reply to the comment left by Simon Lever – Chartered Accountant helping clients get the best returns from their properties at 23/05/2025 – 11:50
This is of course absolutely right. A small non-incorporated landlord cannot offset finance costs against rents any more and so if mortgaged and also running a business or earning a salary will often have to increase rents to avoid a cash loss, thereby recovering the increased tax bill from the residential tenant.

The same would apply with VAT. If landlords are obliged to charge VAT and can’t deduct it then they will have no other option but to increase their rents.

But this kind of thing is a general symptom of this labour government. They lie to the electorate about what the effects of their policies are and the electorate doesn’t necessarily understand that if they own a pension, their own principle private residence, or a buy-to-let, then in effect labour is going to attack them. This is particularly the case because although Rachel Reeves is trying to lure wealthy expats home:

https://www.telegraph.co.uk/money/tax/inheritance/loophole-inheritance-tax-british-expats/

In reality all their policies attacking people with earnings or assets has the effect of driving high earners and high net worth individuals oversees. When this happens labour has no option but to attack middle-income earners, home-owners and small business owners. And they lie about the effect of their policies in an attempt to cling onto power for as long as possible.

This government says one thing but does something else. And that’s not just on housing policy.

Small landlords used to be able to hold rents down a bit: Increasingly they have no option but to put rents up, so tenants suffer.

But also, one of the effects of this labour government is that business generally can see that this government is increasingly attacking assets that can’t be moved…land and buildings. So the smarter businesses are going to realise that if this debacle continues they are going to have to move the ownership of assets overseas. So for example you might have no option but to use land or buildings in the UK, but the ownership of assets like plant, machinery, intangible assets will increasingly need to be offshore.

What labour are doing is a disaster and in the end it is not just the rich and big business that will suffer for that. The consequences of their incompetence and their dishonesty will be inflicted on the rank and file of this country.

45% of PRS landlords have 1 property and 38% own between 2 to 4 properties and this 83% own 51% of the tenancies and the remaining 49% are owned by the 17% limited companies and corporations, that avoid section 24 in the main.
The 83% are in their own names the cost of moving into a limited company CGT and stamp duty is onerous. 63% have a gross income of less than £20k. The PRS market has been stagnant in size since 2016, this despite an increase in population of 3.6 million. HMRC estimates that 20% will be leaving this year, where are the evicted tenants going to live, councils are going bankrupt coping with migrants. Landlords will sell up on mass.

So if VAT is applied how will that work, currently if your turnover is below £90,00 you do not have to register for VAT, and I guess this would cover most BTL ‘businesses’. It would be very difficult for the government to apply special VAT rules just to BTL as they would have to lower the VAT registration threshold.

Reply to the comment left by GlanACC at 23/05/2025 – 13:43
The VAT delay may not help or delay the payment. Simply provide that from a date that the tax is payable. Never mind that it is imposed well before any rent review date?
We are one of the single property LLs, part of the Bricks and Mortar gang. Silly us? It seemed a good idea at the time.

Come on people, the suggestion of VAT on rents is pure click bait and about as likely as consistent joined up rational government policy.

Next you’ll be talking Jaffa Gaffa tarriffs on letting agents.