NRLA calls for landlord tax reform to boost the PRS

Landlord tax reform should be used to encourage investment and increase the supply of homes to rent, according to new proposals for the private rented sector from the National Residential Landlords’ Association (NRLA).

The 17-page plan calls for changes to Capital Gains Tax rules, energy efficiency incentives and the restoration of Local Housing Allowance rates.

It also proposes stronger enforcement against criminal landlords and new powers to tackle anti-social behaviour, particularly in HMOs.

The recommendations have been sent to ministers, think tanks, stakeholders and the Prime Minister, Andy Burnham.

Landlord tax changes

The NRLA’s chief executive, Ben Beadle, said: “The English Housing Survey shows more than 80% of private renters are satisfied with their homes, and two thirds say they find it easy to afford their rents.

“That said, we know there is room for improvement.”

He added: “The country is still in desperate need of homes to rent, and if the government decides to bring CGT rates in line with interest rates it is essential they offer alternative support to landlords to remain in the sector and continue to invest.

“We all agree the country needs a healthy, vibrant private rented sector, and with 1.34 million households on the waiting list for social homes it is more vital than ever.”

CGT investment relief

One proposal is a deferred annual investment allowance which would build up each year but only be realised when a landlord sells a property, with those investing for longer receiving a higher payment.

Business Asset Rollover Relief would also be extended to residential property, allowing landlords to defer CGT when sale proceeds are reinvested in new homes to rent.

The tax would remain payable when the replacement property was eventually sold. The plan comes amid discussion about bringing CGT rates into line with Income Tax.

Energy efficiency support

The proposals also call for specified energy efficiency improvements to be treated as revenue costs so landlords could deduct them against income tax.

Ministers are being urged to publish an annually updated list of qualifying measures and create a modernised Landlord Energy Saving Allowance covering work such as double glazing and low-carbon heating.

Local Housing Allowance rates would meanwhile be restored to at least the 30th percentile from the next financial year and maintained there for the rest of the Parliament.

The plan also calls for an assessment of the social and economic impact of restoring LHA to the median rent, alongside stronger action on anti-social behaviour in HMOs.