Skewed policy favouring holiday homes

Skewed policy favouring holiday homes

0:01 AM, 31st January 2020, About 4 years ago 14

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Growth in the number of short-term lets across the country is a symptom of skewed policy that favours holiday homes over long-term properties to rent.

A new report published today by ARLA Propertymark suggests that nearly half a million properties could be left unavailable for longer-term rent as more landlords exit the market in favour of short-term lettings.

The Residential Landlords Association argues that this is in large part because the tax system favours holiday homes over the provision of long-term homes for private rent. Whilst the Government has almost completed the process of restricting mortgage interest relief for landlords to the basic rate of income tax, this measure does not apply to furnished holiday lets.

David Smith, Policy Director for the Residential Landlords Association, said:

“Today’s report highlights how inconsistent the Government’s approach to the rental market now is. On the one hand the Ministry of Housing wants to encourage more landlords to offer properties to tenants on a long-term basis. On the other hand the Treasury has a tax system which makes renting out holiday homes more appealing at a time when demand for homes to rent is outstripping supply.

“What we need is a tax system that supports and encourages the majority of hard working landlords doing a good job to provide the long-term, quality rental accommodation tenants desperately need. We call on the Chancellor to do this in his forthcoming Budget.”


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Comments

Dennis Forrest

17:52 PM, 10th February 2020, About 4 years ago

Reply to the comment left by Mark Alexander at 10/02/2020 - 16:52
At the end of the day it does not really matter whether HMRC classify a landlord letting on a AST as a business or not, it is how they treat that business for tax purposes compared with other businesses.
The normal rules have been so modified and devalued as to make that classification as a business almost worthless. They apply rules which apply to residential letting that apply to no other business.
Do you think that most independent BTL investors will agree with the following statement?
We accept the fact that we cannot get full tax relief on our loans. We also accept that we have to pay a higher rate rate of CGT on our property disposals and cannot roll over our capital gains. We also accept the fact that our income is not counted as earnings and is therefore not pensionable.
We are however comforted and reassured that what we are doing is worthwhile because at least the HMRC classify us as a business!

Mark Alexander - Founder of Property118

18:03 PM, 10th February 2020, About 4 years ago

Reply to the comment left by at 10/02/2020 - 17:52
Depends on whether they operate though a Limited Company or not. They do have choices.

Dennis Forrest

18:17 PM, 10th February 2020, About 4 years ago

Reply to the comment left by Mark Alexander at 10/02/2020 - 18:03
Which brings me back to my post of 31st January where I stated the only way out was to form a company and then pay corporation tax instead of income tax. This might be a good choice for new investors starting out and hoping to build up a sizeable portfolio.
For smaller investors with only one or two properties this is unlikely to be an economic way out. It might also be a problem for investors who have properties which they have held for a long time and could result in sizeable immediate CGT bills on company formation.

Mark Alexander - Founder of Property118

18:20 PM, 10th February 2020, About 4 years ago

Reply to the comment left by at 10/02/2020 - 18:17
Please see our Tax section http://www.Property118.cim

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