Section 24 hits our Armed Service men and women

by Property 118

9:31 AM, 1st June 2018
About 5 months ago

Section 24 hits our Armed Service men and women

Make Text Bigger
Section 24 hits our Armed Service men and women

Military personnel who rent their homes out whilst stationed away are being hit by the Government’s Section 24 tax hikes on private rented housing.

A report by the Royal United Services Institute said 59% of married members of the armed services own their own home and for those who rent this out when they are posted either abroad or elsewhere in the UK:  “taxation on rental income and recent changes to ‘buy-to-let’ legislation makes this increasingly financially difficult for service personnel.”

The tax increases introduced over the last two years include taxing a landlord’s rental income, rather than their profits, a phased reduction in mortgage interest relief to the basic rate and reduced ability to reclaim the costs of wear and tear.

David Smith, Policy Director for the Residential Landlords Association, said: “Today’s report is yet another indictment of the Government’s confused approach to the taxation of private rented housing which is leading to a loss of affordable homes.

“The country will rightly be angered that armed forces personnel wanting to rent property out whilst on active service are being hurt by this needless, ideologically driven assault on rental housing.

“Faced with a severe housing crisis we need a tax system that supports growth and encourages the provision of the new homes to rent we need to meet rising demand. It is time for the Treasury to think again.” 

The Royal United Services Institute (RUSI) is the world’s oldest independent think tank on international defence and security. read more



Comments

Graham Bowcock

12:25 PM, 1st June 2018
About 5 months ago

The points made in this article are very valid and demonstrate the unintended consequences.

The problem actually goes beyond the armed forces and catches anybody in tied accommodation who may wish to be prudent and buy a house for their retirement. Examples include vicars, farmworkers, tenant farmers, school housemasters and those who "live over the shop". There may well be more, but I have worked with these categories in my career, all trying to do the sensible thing!

Graham

Monty Bodkin

13:28 PM, 1st June 2018
About 5 months ago

When faced with the decision to rent your home when working away or leave it empty, many will now choose the latter.
So much for the old "properties won't just disappear" chestnut.

SammyG

20:29 PM, 1st June 2018
About 5 months ago

A weak article with almost no facts. How many service personnel are actually affected? Not many I am sure. There is a real danger that this "we just care about other people" approach is going to back fire on landlords. I would be very careful exploiting service personnel for propaganda purposes. Which is what this is.

-How many service personnel rent out their property when abroad?
-How many of those will need a BTL mortgage to carry on doing it?
-How many of those will be thrust into the higher tax bracket as a result given how poorly paid they are?
-How many of those will actually lose money as a result, rather than just making less?
-How many landlords have expressed public concern in the past for service personnel when it comes to their finances?

Monty Bodkin

1:13 AM, 2nd June 2018
About 5 months ago

Reply to the comment left by SammyG at 01/06/2018 - 20:29
The "propaganda" was taken from a paper published by the Royal United Services Institute, a highly respected institution founded in 1831 by the Duke of Wellington.

Average service pay is around £33K. Those buying a house will tend to be close to or in the higher tax bracket. Few will be able to buy without a mortgage.

Service personnel have been required to move every 3 years traditionally (not just abroad but to other parts of the country).

Service personnel will be more affected by section 24 than most (any?) other professions.

Suggest you read the paper and appendices before commenting further;

https://rusi.org/sites/default/files/201805_op_the_home_front_web_0.pdf

Neil Patterson

7:17 AM, 2nd June 2018
About 5 months ago

All excellent points Monty

SammyG

18:11 PM, 2nd June 2018
About 5 months ago

Reply to the comment left by Monty Bodkin at 02/06/2018 - 01:13"Service personnel will be more affected by section 24 than most (any?) other professions.
Suggest you read the paper and appendices before commenting further"
----------------
Thank you. I have now read the report. Now that I have done so, I can only assume that either you have not read it yourself, or that you thought I would not read it once you provided a link.
The theme of the report is regarding the general living situation of service personnel and their families, and how this is affecting the ability to attract/retain personnel. The focus is on the quality and location of SLA and particularly SFA and the ability of non-service family members to lead fulfilling lives/careers while in SFA right now and in the future.
Additionally, its focus is on changes to these provisions that are being discussed due to the on-going and future cost of renting back the estate that was effectively sold off to Annington Homes in 1996. Yes, 1996. Gordon Brown would be proud of his Conservative predecessors' timing of this sale. The National Audit Office has of course branded the sale "poor value." (p. 9)
Section 24, not even mentioned by name, is referred to, briefly, in two sentences of page 12 of the 40 page report, almost as an aside while discussing the actual issues that are the focus of the report.
For those who have not read the entire report, which I suspect at the time of this post is everyone on this site, I encourage you to at least read the Recommendations section that starts on page 32. There you will see just how concerned the report's authors are with Section 24. It is not referred to once in the recommendations. It is certainly not suggested that Section 24 be reversed.
But just how many service personnel are going to be affected by Section 24? Well, the 59% highlighted in the original post is of course irrelevant. The percentage of personnel who own their own home is 49% (p. 15). So less that half straight away. You can focus on the 59% of families if you want, but that is just going to make the numbers affected even smaller. And I get the impression that many of these, while living away during the week, return to their own homes at weekends.
So what about hard facts? How many actually rent out their homes? Well, "the number of military who have bought their homes on a buy-to-let basis is not reported." (p. 15). Which begs the question, on what do you base the assertion that "Service personnel will be more affected by section 24 than most (any?) other professions"?
My original questions are still relevant and unanswered. How many personnel rent out their property? How many are going to be thrust into the higher tax bracket when the average income is according to you, £33k? They can receive £12k pa in rent with no problems. That is before taking into account efficiencies achieved with married couples. Just how many people are going to be affected in reality, and how much is it going to cost them? Not much judging from the above, which is why the report barely mentions it.
If service personnel are using BTL for investment purposes, the fact that they are service personnel is irrelevant. If they are using BTL to secure their own home for when they leave the services, the report mentions ways that this can be achieved. Scrapping Section 24 does not appear to be one of the suggested methods.
But let us say this is actually a problem. I am sure we can find a way to mitigate this just for the services. Focus groups were consulted, and page 24 of the report states:
"What became clear was that both groups considered the military to be ‘exceptional’, when compared with other areas of society, and that bespoke rights and products ... should be a feature of military life."
So there we have it. Bespoke rights for service personnel. Perhaps a carve out? Something can be done just for them, and the public will almost certainly be behind it.
Problem solved.
I thank you for your selfless concern for the welfare of service personnel, but if I were you I would leave this subject alone.
By the way, you advised me to read all of the appendices. I have now done so and find them to be irrelevant to our discussion. Can you be more specific as to where in the appendices I should be looking?

Michael Barnes

21:06 PM, 2nd June 2018
About 5 months ago

Reply to the comment left by SammyG at 02/06/2018 - 18:11
I also have now read the report, and largely agree with you: it is one paragraph that has been seized upon by the RLA and put into an article with little or no thought about its significance.

Monty Bodkin

9:09 AM, 3rd June 2018
About 5 months ago

Reply to the comment left by SammyG at 02/06/2018 - 18:11
Thank you for taking the time to read the report, your earlier post was clearly written from a position of some ignorance, but having read it doesn't make you an overnight expert.

"How many are going to be thrust into the higher tax bracket when the average income is according to you, £33k? They can receive £12k pa in rent with no problems."

The average income (taken from an unsubstantiated source BTW) is just that, an average income. A raw recruit isn't earning that kind of money, isn't buying a house and isn't directly affected. A sergeant major will be earning close to or above higher tax bracket (depending on pay grade). They will be directly affected.

"But just how many service personnel are going to be affected by Section 24? Well, the 59% highlighted in the original post is of course irrelevant."

You're missing the point. This is not a big problem for 18 year old recruits.

"By the way, you advised me to read all of the appendices."

The answers to the questions you want to know, as far as they are available, are in the appendices.

"But let us say this is actually a problem."

Now we've both read the report, we can safely say it is.

"I am sure we can find a way to mitigate this just for the services."

I don't think 'we' can. This is a huge problem and has been for a long time- long before section 24 was even thought of. Section 24 exacerbates the problem.

"Perhaps a carve out? Something can be done just for them"

Completely agree.

"Problem solved."

I'm sure the two professors and two doctors who wrote this report will be greatly relieved to hear it.

Monty Bodkin

9:18 AM, 3rd June 2018
About 5 months ago

Reply to the comment left by Michael Barnes at 02/06/2018 - 21:06"it is one paragraph that has been seized upon by the RLA"
Of course the RLA are going to comment on it from their point of expertise.
Question is, why aren't the likes of Shelter and the Guardianistas also highlighting this? (The whole report, not just section 24)

Michael Barnes

14:31 PM, 3rd June 2018
About 5 months ago

Reply to the comment left by Monty Bodkin at 03/06/2018 - 09:18
Of course the RLA are going to comment on it from their point of expertise.

And that appears to be the point that SammyG first made: LL groups attempting to use the position of members of the armed forces when the source information does not support it, and thereby looking stupid or opportunistic.

The authors wrote (about tax changes) "Research is ongoing as to how much of an impact these changes have had on service personnel, but it seems a substantial issue."
If the RLA had included that in their report and considered it before David Smith made his comments, then it might have been a reasonable bit of reporting. Instead they reported as though the effects of S24 were a significant part of the published report, or indeed the subject of the report.

I agree that the report deserves to be widely discussed in the media, as we should be supportive and caring to those who volunteer to put their lives at risk so that we do not have to.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Shelter's website says Section 21 does not cause homelessness

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More