24th
May 2019
A new report from the IEA (Institute of Economic Affairs) criticises the government's treatment of PRS landlords as being unjust in penalising them for apparently 'causing' the housing crisis.
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The independent think tank's report 'branded' the government's recent tax changes for private landlords as defying “any basic economic analysis”.
The Telegraph Money was given exclusive access to the report prior to its publication, and the IEA is urging for a dramatic change in how properties, especially rented 'homes', are taxed, stating that buy-to-let owners are being “discriminated against” in comparison to owner-occupiers.
The IEA believes that in many cases landlords will have to endure an 'effective' tax rate over 100% after 2021, when the even tougher tax rules will come into force.
The two authors responsible for the report, Rosalind Beck and Philip Booth who are two highly respected academics specialising in the property market, categorically state that undoubtedly tenants will face higher rents because of the expected exit of landlords resulting in dwindling numbers of rental 'homes'.
The report contains a further warning that the tax changes could see law abiding and honest landlords could be replaced by some investors who are less reputable.
Booth said: “Recent tax changes to private rented housing will raise rents and reduce the supply of houses for rent.
“The government, under policies set in train by Mr [George] Osborne, is subjecting private landlords to a sustained assault by increasing stamp duty and not allowing finance costs to be fully deducted for tax purposes.
“This policy contradicts the basic principles of sound tax policy and the Treasury’s justifications are disingenuous. The policy may create situations in which over 100% of a landlord’s profit is due in tax.”
The IEA report strongly advises the government to immediately perform a U-turn on the present mortgage interest tax relief and stamp duty changes and revert to their previous 'status quo'. It states that the present tax regime has made it “more complex and less economically coherent."
The report also decries the lack of equality when dealing with rented homes owned by companies who enjoy many more advantages, tax wise, over those owned by a single landlord. It suggests that stamp duty should be scrapped altogether, even if it was to be replaced by a new 'property' tax.
The report includes the statement: “The Government has changed the tax system in a way which leads to private landlords being taxed more harshly than other forms of business."
Richard Merrick of PIMS, said: "Even the 'most influential think tank in modern British history', as described by Andrew Marr, reports that the government's onslaught on private landlords is economically unsound and will undoubtedly increase rents, which could lead to even more cases of homelessness."
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