Lord Flight Disagrees With Landlord Tax Grab

by Mark Alexander

15:16 PM, 18th December 2015
About 3 years ago

Lord Flight Disagrees With Landlord Tax Grab

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Lord Flight Disagrees With Landlord Tax Grab

Lord Flight cc’d the Property118 Campaign Committee into an email to George Osbourne commenting on the restriction of Finance Cost Relief for Individual Landlords.Lord Flight Disagrees With Landlord Tax Grab

In his email to the Chancellor Lord Flight said …

“A lot of Buy to Let investment has been an alternative to saving for old age via pension schemes.  Up until World War II investing in rented property was the main method of providing for an income in old age.  Given the poor performance of the Stock Market over the last 20 years, it is hardly surprising that many people have opted for Buy to Let investment as an alternative source of retirement provisioning.  But Buy to Let does not enjoy any of the major tax advantages of pension saving, i.e. tax credit on the amount invested and accumulation of income and capital gains tax free within the pension scheme.  The only Buy to Let “tax advantage” has been the ability of the interest cost to be offset against an individual’s income to determine their tax rates/bill – the very thing which you have attacked.

The combined new 20% limit and additional 3% Stamp Duty on new Buy to Let investments may cause the very crisis in the Buy to Let market of which the Governor of the Bank of England has just warned.  Many Buy to Let investors may seek to sell their properties where buyers will be few, given the new, additional 3% Stamp Duty.  I attach a relevant article in the Telegraph last week warning that sales could put thousands of tenants’ security at risk.

I suggest the Government’s thinking that Buy to Let investment has “squeezed young buyers out of the market” is misconceived.  Rather, it has served to provide substantial additional accommodation for young people, not yet able to afford to buy a property.  The real problem here has been our nightmare planning arrangements, the new high rates of Stamp Duty applying to properties, in the Greater London area, and the hoarding of land with planning permission by developers.”

On a different, but related front, I also suggest the risks of a major crash in house prices in London and the South East has risen considerably, partly as a result of the penal rates of Stamp Duty applying to London properties.  The recent announcements by the banks indicate that some 100,000 middle to senior ranking staff are likely to be made redundant over the next year or so.  Many will be looking to sell their London properties and move to a cheaper part of the country.  Younger buyers cannot afford to buy, particularly given the Stamp Duty costs for which they cannot borrow.  Foreign purchases are declining as a result of the major increases in their taxation.  If there is a crash in Greater London property prices, this will have a major impact on the banks and on the economy as a whole, for which the Government will be blamed.  In short, the new penal rates of Stamp Duty, together with the aggressive fiscal attack on the Buy to Let market are “playing with fire” when other factors are changing the balance of supply and demand for properties. 

I, therefore, urge you to think again about both Stamp Duty rates and the fiscal attack on Buy to Let.”

About Lord Flight

The Lord Flight was born Howard Emerson Flight on 16 June 1948 , and is a Conservative Life peer sitting in the House of Lords since 13 January 2011. He previously sat in the House Of Commons as MP for Arundel & South Downs.

He was Shadow Chief Secretary to the Treasury (2002 to 2004) in opposition.

He was Deputy Chair, Conservative Party.

Lord Flight has the following focus areas :

Policy Interests – Business, industry and consumers; Economy and finance; Education; Employment and training; European Union; Social Security and pensions
UK Areas – East Anglia; Greater London; West Midlands



Comments

Joe Bloggs

9:54 AM, 19th December 2015
About 3 years ago

no mention of immigration! i suppose that wouldnt be pc but nevertheless surely the main cause of population growth and thus the housing crisis!

Chris Walters

10:23 AM, 19th December 2015
About 3 years ago

At last ! Someone gets it!

Seething Landlord

10:37 AM, 19th December 2015
About 3 years ago

Reply to the comment left by "Joe Bloggs" at "19/12/2015 - 09:54":

How is that relevant to the Chancellor's attack on BTL?

Joe Bloggs

10:42 AM, 19th December 2015
About 3 years ago

KINDA OBVIOUS...we are being blamed for a prob primarily caused by government...FTB being priced out because of an imbalance in supply and demand. dont you think there is a connection between immigration and demand. im not saying immigration is good or bad, just pointing out the obvious to the PC brigade who wish to snuff out free speech.

Chris Byways

18:16 PM, 19th December 2015
About 3 years ago

We need more dwellings, but there is a finite limit, the bigger driver is demand,

Of course second homes are far more damaging, buy a family home and leaving it empty most of the year should NEVER be equated to BTL. As GO is doing. And foreign speculators push prices up perhaps to bubble territory in London.

But a near infinite number of immigrants, although many are or will good citizens -but not all- are a much bigger driver imv.

Bloomberg says
" In 2014, there were 118,000 such arrivals from the 15 oldest EU members. In the same year, the government issued almost 217,000 national insurance registrations, permitting migrants from those countries to work in the U.K. The gap, which has widened in recent years, is leading some to question whether immigration is far higher than assumed" http://www.bloomberg.com/news/articles/2015-12-18/are-the-u-k-s-immigration-statistics-telling-the-full-story-

Worrying.

Another known unkown is of the 300,000 odd leaving the UK compared to the 600,000 arriving have different housing requirements.

Those leaving, I would speculate have acceptable accommodation, in general. Those arriving probably do not. So the 336,000 difference is far worse for the LHAs tasked with finding suitable accommodation. So surely the PRS is part of the solution, not the problems as GO seems to have been brainwashed into thinking.

The wrong solution to the wrong problem. But I might be wrong.

Neil Robb

19:26 PM, 19th December 2015
About 3 years ago

I am just chuffed that someone in his position is actually trying to do something and understand how crazy and damaging these changes can be.

Steven Burman

10:57 AM, 21st December 2015
About 3 years ago

Reply to the comment left by "Chris Walters" at "19/12/2015 - 10:23":

I agree Chris.....but I fear it is too little, too late. Osbornes tax policies have little to do with the 'real world' and are nothing more than political posturing. BTL is an easy target and attacking it is popular with the ill-informed general public.

Personally, I am planning to sell up and go lay on a beach somewhere! When it all goes wrong (which it inevitably will) I hope Osborne pays the ultimate price! Can you imagine this buffoon as PM? God help us!

Chris Walters

13:43 PM, 21st December 2015
About 3 years ago

Reply to the comment left by "Steven Burman" at "21/12/2015 - 10:57":

Steve,

My thoughts exactly!

My wife and I have worked full time developing our property business for the last 12 years. We are full time landlords to 39 tenants many of which have been in our properties for many years. I can't remember last time we raised any rents, we get Christmas cards from many of them and I can say without fear of contradiction the majority if not all are happy.

The changes introduced by Osborne will have a catastrophic outcome for us. Our tax liability will totally consume what is currently our income. There is no point what so ever getting another "job" to supplement the BTL income as that too will be taxed at 40% meaning even a job at the local supermarket will at best give us £4 an hour!

George has completely removed the stuffing out of being an entrepreneur and trying to provide for yourself through the life. I have had it with UK and now intend a gradual sell off taking advantage of my CGT allowance while it's still there an get the hell out of here. A beach somewhere sunny sounds appealing!

I for one will never be voting Conservative again irrespective who is sitting in the top seat. I feel well and truly conned!

The logic behind the new tax rules are flawed from the outset.
The issue he is trying to avoid will in fact be exacerbated , how can a person of his supposed intelligence not realise that.

The obvious outcomes are clearly although not necessarily in this order....

Rents rising significantly
Landlords selling up
Less property available to rent
Rents going up
Landlords going bust
Re-possessed property back on market by lenders
More shortage of rental property
Impact on lenders bottom line

The whole thing is a shambles put together by some ill informed Treasury officials who clearly can't see the big picture.

See you on the beach !

The Property Man

1:58 AM, 22nd December 2015
About 3 years ago

All I can say is Thank You Lord Flight on behalf of ALL LANDLORDS as this tax change will effect everyone. We all need to stick together to fight this before its to late !!!!!

Appalled Landlord

11:32 AM, 23rd December 2015
About 3 years ago

When Lord Flight referred to deducting interest from income he meant rental income only. BTL interest is not deducted from any other income that a landlord might have – it is not like the way MIRAS used to be. Nor can BTL losses be set off against any other income.

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