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fru-gal

"buy-To-Let Investors Enjoy £5Bn 'subsidy"

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http://www.telegraph...bn-subsidy.html Some of the comments at the bottom are great.

Over one million landlords claim annual tax breaks on their investment properties each year, citing tax-deductible costs totalling £13bn. These are legitimate expenses, the biggest of which is the £6bn annual cost of interest paid on buy-to-let mortgages.Using assumptions about the tax brackets into which most landlords are likely to fall, a think tank - the Intergenational Foundation - has calculated these reliefs cost the wider taxpaying public up to £5bn per year. It has published the information in a report with the provocative title "Why Buy to Let equals Big Tax Let-off".

The tax relief figures surfaced in a Freedom of Information request undertaken by the Intergenerational Foundation, and relate to the tax year 2010-11.

The organisation says landlords benefit "unfairly" from being treated as other businesses, enabling them to offset an array of costs and reduce their taxable incomes substantially. Other special perks and "loopholes" make the public subsidy evern more attractive to investors The "wear and tear" allowance, for example, which enables landlords to claim 10pc of gross rent without detailing their expenditure on the property, is also "unfair and distortive", it is argued. The ability of landlords to avoid paying capital gains tax on their property for the last three years of ownership, if they ever there, is another reason why the sector is "under-taxed".

More contrvoversially, the Foundation said the rapid growth of buying-to-let "places first-time buyers at a disadvantage". It says the average landlord is 53 and wealthier than the wider public; and that there is "clear evidence the growth of BTL increases overall house prices" and "prevents young people from saving" due to high rents.

Growth_of_Buy-to-l_2744728c.jpg

The Foundation is calling on Government to scrap some of the allowances made to landlords. But it claims one reason why tax perks are so generous is that "current members of parliament are statistically more likely to be landlords than members of the general population", as shown in the table it published.

MPs__property_inve_2744858c.jpg

The Foundation said it hoped its report would spark debate about the fairer taxation of landlords. It listed the many expenses which, under current rules, buy-to-let investors can claim relief against. Apart from mortgage interest, these include lettings' agency fees, lawyers', accountants' and brokers' fees, insurance premiums, council tax and service charges. It said interest clsts were by far the biggest expense - but broke others down into other major categories, as shown in thie chart, below.

Landlords__tax_cla_2744901c.jpg

The full report can be found here.

Edited by fru-gal

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+ 7.9 Billion housing benefit paid to landlords.

Figures from the Commons library show the amount of housing benefit paid to private landlords will rise from £7.9billion to £9.4billion.

Check out all the latest News, Sport & Celeb gossip at Mirror.co.uk http://www.mirror.co.uk/news/uk-news/bedroom-tax-costing-more-saves-2214198#ixzz2lg7dfBap

Follow us: @DailyMirror on Twitter | DailyMirror on Facebook

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I wonder how many 'amateur' landlords argue that loan interest is a legitimate 'business' expense they should benefit from.

I don;t actually mind tax-decudtable interest in line with other businesses, so long as they are run in accordance with other businesses- annual accounts to Companies house, transparent director info, tax etc.

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I wonder how many 'amateur' landlords argue that loan interest is a legitimate 'business' expense they should benefit from.

I don;t actually mind tax-decudtable interest in line with other businesses, so long as they are run in accordance with other businesses- annual accounts to Companies house, transparent director info, tax etc.

If the property is owned through a limited company then company accounts are available for all to see. Any self employed businessman , provides accounts to the inland revenue, they are not shared with the public, just the same as any other business. Thats the advantage of unlimited liability :D

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That report has the average age of btl landlord as 53. I don't think they would get a residential mortgage at that age so guess they are running a business. Round my way 4% rental yields For new ppurchase.

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Headline's wrong. Typical of the Telegraph to deliberately underestimate the size of subsidy.....

That tweet is nonsensical.

2010/11 CGT+IHT+SDLT = £12.3bn. The £13bn is the amount offset against rental income, giving a tax saving to property letters of £5.2bn if they all pay tax at 40% marginal rate (which they most definitely don't).

And he's the personal finance editor of the FT...

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This logic is simply wrong.

The tax system in fact favours owner occupiers massively. Ignoring for one moment the massive gift which is the Primary Private Residence exemption for CGT, they pay no tax at all on the income from their home either. Owning a home produces a substantial notional income in the form of imputed rent. To level the playing field we would have to go over to a system where owner occupiers are taxed on imputed rent minus expenses. I'm not suggesting for a moment that that's a good idea. Starting to tax imputed income would create a system of nightmarish complexity. But let's just acknowledge that the tax system (not unreasonably) gives a huge helping hand to owner occupiers.

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This logic is simply wrong.

The tax system in fact favours owner occupiers massively. Ignoring for one moment the massive gift which is the Primary Private Residence exemption for CGT, they pay no tax at all on the income from their home either. Owning a home produces a substantial notional income in the form of imputed rent. To level the playing field we would have to go over to a system where owner occupiers are taxed on imputed rent minus expenses. I'm not suggesting for a moment that that's a good idea. Starting to tax imputed income would create a system of nightmarish complexity. But let's just acknowledge that the tax system (not unreasonably) gives a huge helping hand to owner occupiers.

Indeed – and this is how the UK taxation system used to operate under Schedule A (although it was far from being a realistic assessment of the benefit).

Steve Wilcox (Centre for Housing Policy, University of York) attempts to quantify the fiscal benefit to owner occupiers in his annual UK Housing Review.

His commentary on the subject from the 2013 edition is available online:

http://www.york.ac.uk/res/ukhr/ukhr13/commentaries-pdf/UKHR%202013%20Commentary%20Ch6.pdf

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Though I have little sympathy with BTL landolords, I hate it when the 'solution' to anything is 'more taxes'.

It's pretty odd to worry about central government's collection of rent within the land they control, and to ignore landlord's collection of rents within the land they control.

Presumably, if the government devolved all its tax raising powers to unelected individuals, you'd be happy?

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It's pretty odd to worry about central government's collection of rent within the land they control, and to ignore landlord's collection of rents within the land they control.

Presumably, if the government devolved all its tax raising powers to unelected individuals, you'd be happy?

If you actually bothered to read and think about what I wrote, you would realise that I don't like taxes, whoever they are raised by. :rolleyes:

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