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Sancho Panza

Buy-To-Let Investors Enjoy £13 Billion Tax Deductibles Per Annum

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Telegraph 25/11/13

'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 lived 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 costs 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 paper is linked to by the Telegraph.Well worth a read.

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