Friday, Jun 26, 2015

Evidence that landlords can pass on their increased tax bill = no

Torygraph: The single reason why buy-to-let investors must keep their £5bn-a-year tax break

"But the consequences for borrowers, lenders and the property market could be unexpected and iniquitous. My guess is landlords would push up rents as far as they could."
Just the same as landlords pushing rents up or down as their interest bill goes up and down, right? How on earth does this bloke expect tenants who are already paying the absolute max that they can to miracle up some extra money to bail out the poor starving landlord? What will happen is that many will sell up, mainly to higher income tenants, leaving a smaller pool of lower income tenants and hence LOWER rents.
An much easier reform in my opinion is to get rid of the ridiculous 10% maintenance allowance. It effectively means that maintenance is not deductible. If you spend £1000 or £0, you get the same deduction.

Posted by mombers @ 11:52 AM (6531 views)
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10 Comments

1. icarus said...

"investors must keep their £5bn-a-year tax break"...and their £25bn a year HB.

BTLLing is treated as a business, but unlike just about any other business it doesn't provide goods or services that customers couldn't easily provide themselves. This ought to be (but obviously won't be) the starting point of all government policies regarding all the taxes, subsidies, regulations and monetary policies which affect the housing market. Home ownership could easily replace BTL.

Friday, June 26, 2015 02:12PM Report Comment
 

2. mombers said...

Rent isn't subject to VAT either

Friday, June 26, 2015 04:58PM Report Comment
 

3. bidin'matime said...

@1. '....but unlike just about any other business it doesn't provide goods or services that customers couldn't easily provide themselves'

If I've understood your triple-negative correctly, do you mean like window-cleaners, restaurants, car-washes, gardeners and a multitude of other businesses that provide things that people could easily provide themselves?

@ 2. 'Rent isn't subject to VAT either'

Just as well, because VAT is invariably passed on to the customer as part of the cost - if VAT rises, then prices rise across the board - and so would rents. Houses aren't subject to VAT either - so it's the quid pro quo.

We're wasting our breath - and our credibility - arguing against letting being treated as a business: the days when people bought BTL in order to 'flip' them for a capital gain are behind us - these days people regard it as a way to 'make their money work for them', whether it's a bit of savings or their pension pot. No politician is going to change the status quo.

As regards the 10%, this applies only to furnished lettings and is to cover furnishings - I agree that it's often more generous than the actual costs and, given that HMRC have recently declared that (unfurnished) landlords can't get tax relief on replacement fridges, cookers, carpets, curtains etc., I wouldn't be surprised to see a reduction in the 10% allowance.

What we need is a sensible level of interest rates: most BTL buyers have no idea how they would survive if rates rose - and (in the absence of MMR for BTL) most lenders have no idea who is vulnerable - and seemingly don't care. I knew a lot of people on the verge of bankruptcy before interest rates collapsed - now they all think they were so bl**dy clever... Sickening, I know.

Saturday, June 27, 2015 02:33PM Report Comment
 

4. killer bunny said...

If BTL is a biz then tax relief appropriate.
If BTL incurs no risk then it is not a biz. Let's see what happens in next Recession.

Saturday, June 27, 2015 03:00PM Report Comment
 

5. icarus said...

@3 - I hope the 'triple negative' wasn't too confusing - you seem to have picked up the meaning OK. There's a difference between the services provided by restaurants and those provided by landlords. You choose to eat out from time to time because you find it more enjoyable than eating every meal at home, or because you are away from home etc. People rent because they have to, not because they enjoy doing so or because there's some other kind of payoff for them. Gardeners often work for people who aren't able to do their own gardening (too old, too little time or expertise etc.). Landlords provide accommodation for those who cannot afford to buy because of the kinds of government policies I mentioned - change the policies, reduce the need for the 'service' they provide. Private landlords' services could be limited to providing for those who need accommodation for limited periods.

Saturday, June 27, 2015 05:30PM Report Comment
 

6. letthemfall said...

I think there is a difference between productive business and rent seeking, and btl is most certainly in the 2nd category. To follow the restaurant comparison, if restaurants bought up so much of the food available that people could only go to them to eat, we would have rentier restaurants. For that reason alone btl should be subject to more tax; it is damaging the economy and people's lives.

Saturday, June 27, 2015 08:46PM Report Comment
 

7. libertas said...

In USA, mortgage interest payments for owner occupiers gets income tax relief.

Saturday, June 27, 2015 10:35PM Report Comment
 

8. reticent said...

@3

Double negatives are only improper when they apply to the same subject. There's NOT any grammatical rule that says you canNOT have more than one un-/not/n't per sentence.

The economic incidence of a tax is not determined by whether it is VAT, income tax or who nominally pays it. It is determined by the relative slopes of the supply/demand curves in the given market, which are a reflection of the price elasticity of the good in question.

Both the demand and supply of rental housing are both fairly inelastic in that people desperately need a place to live and are prepared to spend whatever they find they have to to secure one, but landlords own a certain quantity of property and will take whatever rent they can get (not supplying the property is not an option for someone who BOUGHT specifically to LET). But, as Icarus rightly points out regarding the mortgage interest tax relief and keeps being repeated here ad infinitum, IF LANDLORDS COSTS WENT UP FOR ANY REASON, THEY WOULD PROBABLY STRUGGLE TO PASS THAT COST ONTO TENANTS BECAUSE IF THEY COULD HAVE GOT 20% MORE RENT OUT OF THEM, THEN THEY ALREADY WOULD HAVE.

Rents are not determined by how much landlords need for it to remain worth their while to carry on exploiting a broken housing market and financial system.

@5/6 Bingo.

@7 And in the Economist, they mention what a terrible idea that is every few weeks.

Monday, June 29, 2015 02:16PM Report Comment
 

9. bidin'matime said...

@ 8 - I wasn't commenting on how many negatives are proper or otherwise - I just wanted to make it clear that what I was saying was based on having understood you correctly (fearing that I may not have).

Monday, June 29, 2015 10:19PM Report Comment
 

10. reticent said...

@9 I didn't use the triple negative.

But, if you just wanted to check you understood what was said, it would have been best to avoid language employed by grammar nazis. People can react with hostility to such comments (see 5).

Probably not the first time an innocuous comment was misinterpreted on the internet and escalated quickly.

Wednesday, July 1, 2015 05:41PM Report Comment
 

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