New Landlord Tax Could Affect 4.6 million Tenants

New Landlord Tax Could Affect 4.6 million Tenants

9:43 AM, 5th February 2016, About 6 years ago 19

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Research conducted by Property118 members has revealed how up to 4.6 million tenants could be affected by George Osborne’s tax attacks on buy-to-let landlords. New Landlord Tax Could Affect 7.2 million Tenants

In spite of ever-mounting criticism of the Clause 24 tax-grab from various quarters of the United Kingdom’s private rental sector, constituency MPs persist in replying with the following two points, duplicated courtesy of the Treasury.

These arguments, designed to justify and excuse Clause 24 are that:

  • The measure ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.
  • Less than 1 in 5 of individual landlords are expected to pay more tax as a result of this measure.
  • Source –

The first of the Treasury’s arguments is completely incorrect. Clause 24 will not affect the country’s richest landlords: these of course being corporate rental providers – some with property portfolios reaching into the thousands – and wealthy cash-buyers. The second argument seeks to down-play the effect by giving a misleading impression.

Now, I would like to correct that impression. My aim here is to estimate how many tenants are likely to be affected by Clause 24. HMRC’S impact statement did not give any indication of this, or even mention the word “tenant”.

This article is going to explain how the Treasury’s declared targets – those 1 in 5 of individual landlords “with the largest incomes” – have been calculated to be housing around 4.6 million of the Nation’s tenants. Such a statistic may sound remarkable, but its basis is rooted in the size of the largest, individual landlords’ portfolios.

Among his responses to irate landlords, disseminated to fellow MPs, the Treasury Minister David Gauke explains “The Government appreciates that this will cause some landlords to take difficult decisions regarding their rental properties, which is why the restriction will be phased in over 4 years from April 2017”. The difficult decisions, to which Mr Gauke refers, are of course whether the affected landlords should significantly raise their rents or evict their tenants and sell with vacant possession.

Unfortunately, Mr Gauke and a great many of his Government colleagues have failed to account for the multiplier effect of the aforementioned 1 in 5 of landlords, namely the significantly greater number of tenants on the receiving end of such rent rises and evictions. These landlords each own multiple rental properties.

Let us take as our starting point, the total number of private individual landlords in the United Kingdom. In response to an FOI request, the Treasury stated “When producing the impact report on the proposal to restrict finance cost relief for individual landlords HMRC assumed there were 2.1 million individual landlords in the UK who declared that they rent out 3.7 million properties in total.”

The next stage is to discover how many properties the 1 in 5 own.

For such a data set we must turn to page 11 of the Department for Communities and Local Government’s Private Landlords Survey 2010. This is the latest government study that is available. Here it was reported that 81% of landlords owned just one rental property. Applying this percentage to the 2.1 million individual landlords as per the FOI request gives 1.7 million owning, by definition, the same number of properties, leaving the other 400,000 individual landlords (19%) with the remaining two million properties.

Though evictions and property sales triggered by Clause 24 would almost certainly be concentrated on directly-impacted mortgaged properties, rent rises designed to mitigate these extremes would likely be applied by buy-to-let landlords across their entire portfolio, irrespective of which property is mortgaged or mortgage-free. The simple logic of such a strategy would be to minimise the financial burden upon individual tenants. This would mean that even tenants living in mortgage-free homes would be paying higher rents as a result of Clause 24.

Having obtained a figure for the affected number of properties, the next step is to determine the number of tenants at risk. According to the ONS, the average rental property in England and Wales is occupied by 2.3 tenants. If we multiply the two million properties calculated above by the average number of tenants per rental property in England and Wales (2.3), the sum total of tenants at risk of rent increases or eviction due to Clause 24 is 4.6 million!

Those tenants unable to afford rent increases will be evicted, as will those whose landlords are forced to sell up. With poorer renters increasingly priced out of the private rental sector, the supply of rental properties available to those on benefits will fall, resulting in people having to move into temporary, unsuitable bed and breakfast accommodation at considerable expense to the public purse. The demand for social housing will increase at a time when there are already very large waiting lists for social housing.

In summary, around 400,000 individual landlords (1 in 5), housing 4.6 million tenants, are to be put under financial pressure to increase rents as a result of Clause 24.

Even if only 1 in 5 individual landlords are adversely affected by George Osborne’s buy-to-let tax grab, the number of people impacted throughout Britain will be significantly greater than this quoted grouping suggests. After accounting for the much greater number of their tenants, we can say with confidence that the negative consequences of Clause 24 – of rising rents, evictions, expanded council housing waiting lists, and contracting rental supply – will be massive, widespread and far in excess of official Treasury expectations.

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by Anon

2:00 AM, 6th February 2016, About 6 years ago

Reply to the comment left by "Anthony Endsor" at "05/02/2016 - 10:47":

"an you spot a winner here? Tenants, landlords?
Oh yes, there is one – George Osborne! And what has he succeeded in doing? Making people homeless! Well done to him."

The winners will be those tenants with big deposits, as there will be more supply of property.

I spoke to a neighbour who was thinking of emigrating to Australia. He was thinking of renting his home out. He was concerned about selling up in the UK, as he was worried about being priced out, if he ever returned to the UK.

I explained to him about the new tax changes, would make it uneconomic to rent out the property.

by Carol Thomas

21:18 PM, 6th February 2016, About 6 years ago

Excellent article, best I've read yet! The following has just gone up on Facebook from me.....
This is an extremely well-written article and is a true picture of what is to come. Not many young people can get a mortgage these days - not their fault at all! The banks have made it so difficult for them and getting the huge deposits the banks require - well, who wants to buy a house when it's taken them fifteen.....twenty years or longer just to save a deposit, which can't keep up with price rises !

This whole fiasco is not the landlords' fault, nor is it the tenants, but it is the tenants who will suffer. George Osbourne's "TENANT TAX" is worse than the bedroom tax and the poll tax put together. The only people being "taxed" are those people who want/need/have to rent a private property! Where else will they go - the Council, B&B .......just so, so very wrong!

by Carol Thomas

21:27 PM, 6th February 2016, About 6 years ago

Reply to the comment left by "Anthony Endsor" at "05/02/2016 - 10:47":

Such a sad comment on our times Anthony! I have a lovely young couple with a little boy who were overjoyed to find a clean, tidy well-equipped rental at a reasonable price. They said upfront that they would like to rent their new home for at least seven years ( how often does that happen!). They asked to redecorate and as the husband is a decorator, I agreed and supplied all his materials. He did an amazing job, improving my property no end and in turn, making it their own. I've been a bit of a coward and have stuck my head in the sand with this bloody tax - I don't want to put rents up and I definitely don't want to evict them or any of the other lovely families in my huge portfolio of four houses! I couldn't bear having any of my tenants being made homeless and I am crossing my fingers and hoping for the best. I bet I'm no the only one either!

by Rob

12:52 PM, 12th February 2016, About 6 years ago

It would be great to see the headline "TENANT TAX" on the front page of all the newspapers, at least it would warn all the tenants that are un aware of the coming change.

by Chris Byways

13:02 PM, 12th February 2016, About 6 years ago

Do you think these self serving scumbags, should be a little less rude to their future landlords? Like James Cartlidge,Conservative. So much for their tenant tax!

by Hemant Shah

19:10 PM, 11th March 2017, About 5 years ago

George Osborn and current government will penalise private landlords who provide facilities to the families.

Government had made several bad decision in the past and this is one of them.

Once private landlords from UK stop buying BTL properties then foreign buyer will buy these property and will not bother to rent out and there will be crisis in the property market.

George Osborn thinks he had done good job for the government but ultimately he has been kicked out of number 11 and from the minister committee.
He could have done better to remain in number 11

by Monty Bodkin

11:19 AM, 12th March 2017, About 5 years ago

"1 in 5 individual landlords are expected to pay more tax as a result of this measure."

What of those not having to pay more tax?

Savvy landlords will take the opportunity to increase rents. The ones unaware of it will notice neighbouring market rents increasing and follow suit. Corporate landlords will charge as much as they can. Social housing rents track private rents.

This will be a tax on all tenants.

by Joe Norris

19:35 PM, 21st March 2017, About 5 years ago

Is there an element of wishful thinking to this...? Anyone looking for tenants in and around London at the moment knows that you have to price keenly or face a void. It would be nice if I had some magic ability to dictate rents, rather than just charging what the market can support, but unfortunately this just isn't the reality of the situation. In fact I think official statistics are showing 5% year on year falls in London at the moment - it just isn't possible to impose rent rises in a market which is falling by 5%.

by Monty Bodkin

8:35 AM, 22nd March 2017, About 5 years ago

Reply to the comment left by "Joe Norris" at "21/03/2017 - 19:35":

"It would be nice if I had some magic ability to dictate rents"

You don't (unless you are the Duke of Westminster) but the 20% of landlords affected is more than enough to move the market.

"In fact I think official statistics are showing 5% year on year falls in London"

No they aren't;

Growth in London in the 12 months to February 2017 is now 1.9%

Don't know the reason for London's sluggish current market, could be Brexit and the additional 3% SDLT deadline having more of an effect than elsewhere. These will eventually filter through.

And contrary to the belief of most MP's, the country exists outside of the M25, this affects the whole rental market.

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