24th
Oct 2023
Housing Secretary Gove has categorically stated there will be no government U-Turn on Section 24 and no other positive tax changes which have seriously impacted landlords over recent years.
In spite of the Select Committee on Housing’s written demand for Gove(rnment) to study how the taxation rules’ changes has affected landlords and rental housing supply “with a view to making changes to make it more financially attractive to smaller landlords.”
The all-party Committee has told Gove that his department must “be much clearer about what role it wants the private rented sector to play in the wider housing mix and, in particular, whether it values the involvement of landlords with very small portfolios.”
In a somewhat long winded response, Gove told the Select Committee: “While it is right that people should be free to purchase a second house or invest in a buy-to-let property, the government is aware that this can affect other people’s ability to get on to the property ladder.
“Under the old system, landlords received relief on their finance costs (including mortgage interest payments) at their marginal rate of income tax, which meant that higher rate taxpayers received a more generous tax relief than those on lower incomes.
“To address this, and make sure that all landlords are treated the same by the income tax system, the government phased in a set of reforms to restrict finance cost relief to the equivalent of the basic rate of income tax. The reforms mean that all landlords will now receive the same amount of relief. It also reduces the disparity in income tax treatment between homeowners and landlords.”
Gove also explained his reasoning behind the decision on the tax rule changes because landlords can still claim tax relief at the marginal rate of income tax on running costs such as replacing fixtures/ furniture as well as letting agent fees.
He said: “The government’s position is that finance costs are different to other expenses. Having a mortgage on a property allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without the mortgage.
“As with all aspects of the tax system, the government keeps the tax treatment of property income under review and any decisions on future changes will be taken by the Chancellor in the context of wider public finances.”
Gove’s response finished with: “We need a thriving private rented sector that helps to accommodate these people’s housing needs. Given that 43 per cent of landlords own one property and over 80 per cent of landlords own one to five properties, we understand that the reforms contained in the Renters (Reform) Bill must work for smaller landlords as well as larger businesses.”
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