Petition To Remove Tax Relief On Landlords' Interest!

[stuck-renting]

This petition went live today: http://petitions.pm.gov.uk/landlordspaytax/

We the undersigned petition the Prime Minister to Remove all tax incentives and bonuses that property investors currently enjoy.

Deadline to sign up by: 30 August 2007

Category: Housing

More details:

The phenomenal rise in popularity of Buy-to-Let investment and other types of residential investment is a significant contributor to house price inflation. There is now an obscene divide between people who own property as investment and those priced out of home owner-occupation and the security that brings them and their families. Tax breaks on property investment only add to this economic disparity and must be removed as a minimum step towards levelling the playing field.

[nohpc]

I still don't see what tax breaks are available on btl. You get taxed on any profit you make so there is nothing left to tax.

Edited July 7, 2007 by nohpc

[Nicholas Cage]

I still don't see what tax breaks are available on btl. You get taxed on any profit you make so there is nothing left to tax.

The interest payments on the mortgage are offset against the income from rental as well as agents' fees and maintenance costs, and 80,000 BTL landlords are not paying all the tax on the theiir income.

So yes there is no tax relief nohpc

[nohpc]

The interest payments on the mortgage are offset against the income from rental as well as agents' fees and maintenance costs, and 80,000 BTL landlords are not paying all the tax on the theiir income.

So yes there is no tax relief nohpc

Only the IO payments on the mortgage are offset against the rental income so you get taxed on any profit you make. If any mortgage repayment could be offset then I agree it would be unfair. And agents fee and maintenance costs are business expenses and so should be tax free.

Apart from the fact that most posters on here have an inexplicable hatred of BTL landlords there is no good reason to stop the IO tax relief and it would be unfair. If it was to happen rents would increase exponentially. I know you say well nobody would rent then but if all landlords increased at the same time (which they would definitely have to) then you wouldn't have much choice.

I don't think you have thought this through.

Edited July 7, 2007 by nohpc

[Nicholas Cage]

So yes you get a Tax break, have a read through this site first http://www.property-tax-portal.co.uk/faq_tax_questions.shtml

[nohpc]

So yes you get a Tax break, have a read through this site first http://www.property-tax-portal.co.uk/faq_tax_questions.shtml

"Does a buy-to-let landlord (i.e. long term property investor) have to pay income tax?

Yes, a buy-to-let landlord has to pay income tax to the extent that the income from their property rental exceeds the allowable expenses."

So where's the tax break?????? Tell me another business that gets taxed on losses rather than profit (which is what you are suggesting for BTL)

[Nicholas Cage]

Have a read of this http://www.property-tax-portal.co.uk/faq_tax_questions.shtml

[nohpc]

Have a read of this http://www.property-tax-portal.co.uk/faq_tax_questions.shtml

Just copy and past whichever bit you are referring to. I can't find anything that says BTL landlords don't have to pay tax on any income made above their expenses.

[29929BlackTuesday]

Signed it, got email with link - link doesn't work. What am I doing wrong?

[bambam]

Mine just went live too

http://petitions.pm.gov.uk/btltax/

[Guest happy?]

Only the IO payments on the mortgage are offset against the rental income so you get taxed on any profit you make. If any mortgage repayment could be offset then I agree it would be unfair. And agents fee and maintenance costs are business expenses and so should be tax free.

Apart from the fact that most posters on here have an inexplicable hatred of BTL landlords there is no good reason to stop the IO tax relief and it would be unfair. If it was to happen rents would increase exponentially. I know you say well nobody would rent then but if all landlords increased at the same time (which they would definitely have to) then you wouldn't have much choice.

I don't think you have thought this through.

You're assuming that BTL is a business in the way that say a self-employed plumber is a business. But I know of no self-employed plumbers who speculative behaviour damages communities, increases taxes as a result for the rest of us, or whose actions prevent people establishing themselves in an area and contributing to the well being of that community whilst raising a family.

There's a place for serious, long-term BTL but not at the expense of others, and not subsidised out of my taxes. Rents, of course would not increase as IO landlords would be driven to the wall. Property would drop in price as a result and more FTBs who are now excluded would have the opportunity to compete on a level playing field, to the benefit of all.

Edited July 7, 2007 by happy?

[nohpc]

You're assuming that BTL is a business in the way that say a self-employed plumber is a business. But I know of no self-employed plumbers who speculative behaviour damages communities, increases taxes as a result for the rest of us, or whose actions prevent people establishing themselves in an area and contributing to the well being of that community whilst raising a family.

There's a place for serious, long-term BTL but not at the expense of others, and not subsidised out of my taxes. Rents, of course would not increase as IO landlords would be driven to the wall. Property would drop in price as a result and more FTBs who are now excluded would have the opportunity to compete on a level playing field, to the benefit of all.

Oh how I wish I lived in HPC world where everything is Black and White and one thing quite simply leads to another without causing other problems. Try and take a non biased approach and think of the pros AND cons of your statements is my advice.

If you really think that BTL are single handedly responsible for damaging communities and increasing taxes then you are kidding yourself. BTL buy new build flats how many families buy new build flats. Yes in London it is mostly flats but in other parts of britain nobody wants the other than BTL.

[Guest Yeahbutnocrash]

You're assuming that BTL is a business in the way that say a self-employed plumber is a business. But I know of no self-employed plumbers who speculative behaviour damages communities, increases taxes as a result for the rest of us, or whose actions prevent people establishing themselves in an area and contributing to the well being of that community whilst raising a family.

There's a place for serious, long-term BTL but not at the expense of others, and not subsidised out of my taxes. Rents, of course would not increase as IO landlords would be driven to the wall. Property would drop in price as a result and more FTBs who are now excluded would have the opportunity to compete on a level playing field, to the benefit of all.

BTL certainly is a business

If there was not the rental demand there would not be the amount of btl

The LL is taking on much of the financial risks as are often discussed on this site and providing accommodation to meet the current demand

Preferably the LL should be doing it correctly ie. Managing his properties properly and for the benefit of decent tenants and declaring his tax

Regarding the petition why would the government want to kill the goose with over taxation and cause potential problems for tenants such as losing their accommodation or having to pay increased rents to cover the extra costs?

IMO the petition should be to make sure btl and other businesses are paying their taxes

I agree that Btl seems to have an unfair advantage over ftb's where they get a discount thru bulk buying - So maybe the justification for that should be looked at depending on the need for rental property vs ftb property is certain areas

The real advantage a btler has over an ftber is the obvious one that he can use the rent towards paying the mortgage and this may seem to be helped by the fact that the part of the rent paying the interest is not taxed

But here's why the tax a btler pays is fair: If you think about it the taxation is really looking at the profit a unit is creating from a business perspective

So the interest on a btl has to go in the minus column so the taxable profit can only be the surplus after the interest payment is taken out

What also helps to make it fair is that a btler has to pay all the usual costs on his own residence in addition to his btl costs and is subject to a high rate of tax on his capital gain if/when he sells a btl

What I see as wrong is where btlers not declaring their tax etc get away with it - These people do have an unfair financial advantage compared to others

This would be the same as a self-employed Plummer or other tradesman not declaring his tax and putting taxes up for the rest of us

Remember HPI was mainly caused by relaxed lending and ramping of prices rather than btl

Edited July 7, 2007 by Yeahbutnocrash

[bubbleturbo]

Signed

[Selling up]

I signed for purely selfish reasons. I want an HPC and making BTL even less profitable would help!

On the question of whether it is right or wrong to allow tax relief on mortgage payments, nohpc is right in pointing out that this is normal business taxation practice.

The question is whether in all situations BTL should always be considered a business - for instance, ones investments in the stock market are not considered a business but a personal investment, no matter how many hours one puts into managing them. One could not get loan tax relief on these.

Question: Does BTL in some cases more closely resemble a personal investment than a business?

Answers on a postcard please.

[Fool's Gold]

Only the IO payments on the mortgage are offset against the rental income so you get taxed on any profit you make. If any mortgage repayment could be offset then I agree it would be unfair. And agents fee and maintenance costs are business expenses and so should be tax free.

Apart from the fact that most posters on here have an inexplicable hatred of BTL landlords there is no good reason to stop the IO tax relief and it would be unfair. If it was to happen rents would increase exponentially. I know you say well nobody would rent then but if all landlords increased at the same time (which they would definitely have to) then you wouldn't have much choice.

I don't think you have thought this through.

Then you either move to somewhere which is charging less rent (a smaller property if necessary) or you share with someone else i.e. instead of 2 people renting 2 flats, 2 people rent 1 flat. I don't think you've thought through the fact that if people can't afford to pay rent then ... errr they can't afford it, and as I've mentioned before when you've said rents will rise to that of a mortgage payment, why rent in that situation when it's just as expensive to service a mortgage ?

Seriously, you've not thought it through. Don't you know wages aren't rising to match house price rises ?

[Guest happy?]

Oh how I wish I lived in HPC world where everything is Black and White and one thing quite simply leads to another without causing other problems. Try and take a non biased approach and think of the pros AND cons of your statements is my advice.

If you really think that BTL are single handedly responsible for damaging communities and increasing taxes then you are kidding yourself. BTL buy new build flats how many families buy new build flats. Yes in London it is mostly flats but in other parts of britain nobody wants the other than BTL.

Your creating a strawman rather than addressing the points I made. It's easy to caricature somebody else's argument and then set about destroying that caricature (as you so admirably demonstrate). It's undeniable that in several parts of the country BTL speculation has destroyed communities - with many stable, pleasant areas being turned into ghettos - full of short-term tenants with no interest in what's around them and landlords whose sole interest being rent.

The impact of this speculation is incontrovertible. As well as the short-term effect of the development of run-down neighbourhoods, with local councils having to spend public money clearing-up rat-infested gardens, this destruction of communities has a long-term impact as well. greater social costs including policing, social services, lower educational attainment. Further more it removes spending from the economy which otherwise might support employment elsewhere.

Because an activity is not directly measurable immediately, it doesn't mean that it doesn't have a long-term cost.

There is a place for rented accomodation and despite your fantasy to the contrary it's not my position that it's inherently evil. Housing is not a free-market theory bauble, it's much more complex and important than that. Currently, tax breaks in the UK favour speculation, I suspect that this was not the original intention of the policy, but it's the reality.

What's required is a policy shift which favours long-term community stability, permits the development of a sustainable rented sector and provides a level playing-field for FTB's. As I said previously, I see no good reason why my taxes should subsidise speculation whilst simultaneously de-stabilising communities.

[DabHand]

If l could offset my share investment losses against any capital and dividend gains made in other such investments then l might see a parity. Many BTLs are personal investments, l dont see why they get treated differently. Perhaps if MIRAS was recreated then there would be no issue.

[the end is a bit nigher]

Only the IO payments on the mortgage are offset against the rental income so you get taxed on any profit you make. If any mortgage repayment could be offset then I agree it would be unfair. And agents fee and maintenance costs are business expenses and so should be tax free.

Apart from the fact that most posters on here have an inexplicable hatred of BTL landlords there is no good reason to stop the IO tax relief and it would be unfair. If it was to happen rents would increase exponentially. I know you say well nobody would rent then but if all landlords increased at the same time (which they would definitely have to) then you wouldn't have much choice.

I don't think you have thought this through.

no, you haven't thought this through - you are treating them as a business when the vast majority are private investors - i have pointed out before that they have an advantage over other private investors as they can offset tax against the cost of borrowing which is something someone investing in shares etc. can't do (even if you could get a loan for investing in shares) - if all BTLs were a business then that would be different and i would treat them on the same business rules, but at present they fill in their costs on their private tax return, don't produce accounts etc etc

i am comparing them against other investors (after all, how many properties are sold as 'investments' now), not agains OOs

[nohpc]

no, you haven't thought this through - you are treating them as a business when the vast majority are private investors - i have pointed out before that they have an advantage over other private investors as they can offset tax against the cost of borrowing which is something someone investing in shares etc. can't do (even if you could get a loan for investing in shares) - if all BTLs were a business then that would be different and i would treat them on the same business rules, but at present they fill in their costs on their private tax return, don't produce accounts etc etc

i am comparing them against other investors (after all, how many properties are sold as 'investments' now), not agains OOs

BTL is a business. Nobody would be able to do it if you had to pay tax on all the income made from it except for cash buyers. Assuming that a lot of people currently renting have no plans whatsoever to buy if you suddenly reduced the number of rental properties on the market you would bring about a house price crash and a rental price boom. As house price crashes take years to recover the rental market would be extremely overvalued during that time.

[patprimer74]

Well, I've done my bit!

Hope others will put their signature where their mouth is!

p

[Realistbear]

You're assuming that BTL is a business in the way that say a self-employed plumber is a business. But I know of no self-employed plumbers who speculative behaviour damages communities, increases taxes as a result for the rest of us, or whose actions prevent people establishing themselves in an area and contributing to the well being of that community whilst raising a family.

There's a place for serious, long-term BTL but not at the expense of others, and not subsidised out of my taxes. Rents, of course would not increase as IO landlords would be driven to the wall. Property would drop in price as a result and more FTBs who are now excluded would have the opportunity to compete on a level playing field, to the benefit of all.

This is why, IMO, HPI should be seen as a disease that needs a cure: GC2

[Guest happy?]

BTL is a business. Nobody would be able to do it if you had to pay tax on all the income made from it except for cash buyers. Assuming that a lot of people currently renting have no plans whatsoever to buy if you suddenly reduced the number of rental properties on the market you would bring about a house price crash and a rental price boom. As house price crashes take years to recover the rental market would be extremely overvalued during that time.

There are any number of ways in which property speculation could be controlled or reduced without bringing about a property crash. General rules about maximum percentage of leverage, removal of tax breaks to put BTL on a par with other forms of investment, maximum number of properties per portfolio to capital invested, removal of IO mortgages or requirement to have a repayment vehicle are just a few examples in which speculation would be dampened.

For those genuinely interested in property investment any number of investment vehicles can and are developed.

Just because an activity is profitable in a skewed market it doesn't mean it's either a business or in the economic interest of the wider environment.

MIRAS was a regressive tax and the Conservative government of the day rightly took the decision to remove it - doing so over several years in a manner which eventually meant its death had no impact, a similar strategy could be adopted for BTL tax breaks. Let BTL flourish by all means but let's ensure it does so in a free market - not with state handouts.

[CrashHorizon]

All signed!

[the end is a bit nigher]

BTL is a business. Nobody would be able to do it if you had to pay tax on all the income made from it except for cash buyers. Assuming that a lot of people currently renting have no plans whatsoever to buy if you suddenly reduced the number of rental properties on the market you would bring about a house price crash and a rental price boom. As house price crashes take years to recover the rental market would be extremely overvalued during that time.

Sorry, but for the vast majority it is an investment. If I borrow £100k and buy shares it is a personal investment. If I borrow £100k and buy a flat to let it is a business? Don't buy that at all. Both are reported to the IR through personal tax returns, not through company accounts. Both are personal investments. Why should the BTL get tax relief when the one investing in shares doesn't?

And I aslo disagree with your conclusion about what will happen when the bias is removed. You are correct that it wouldn't make sense to many now, but the result would be property prices falling rapidly until the yield was worthwhile again. And of course, if many BTLs sold as you suggest, then who will they sell to if renters don't buy? You have forgotton that traditionally it is cheaper to buy than to rent so there would be nothing to stop prices falling a long long way.