Landlords say “no” to George Osborne

The private rental sector has been in a state of outrage since chancellor George Osborne announced he would be slashing the tax breaks available to landlords to a basic rate of 20 per cent. For an industry that relies on private investment, this could end up having a devastating impact on the supply of rentable properties.

While Osborne’s intent was purportedly to create a “level playing field” in the housing market, the reality is that this decision will likely prove prohibitive to would-be landlords entering the private rental sector. “A landlord who borrows at even a modest level might end up paying more in tax than he makes in profit,” says Deloitte’s real estate tax partner Phil Nicklin. “This measure must make buy-to-let investment a less attractive proposition in future and may reduce the options for those who see it as an alternative to a pension.”

As far as landlords are concerned, the consequences of Osborne’s budget will be threefold. In addition to cutting mortgage relief, Osborne is also upping premium tax from 6 to 9.5 per cent, and the traditional ‘Wear and Tear’ allowance is being scrapped in favour of a new system designed to offset the cost of replacing and repairing fixtures in furnished properties.

Replacing the Wear and Tear allowance will affect 47 per cent of landlords, according to a recent survey from the National Landlord Association (NLA). “We fully understand the frustration of those landlords who let exclusively on a furnished basis as the removal of this allowance will very likely represent a reduction in the relief they can claim,” says the NLA’s Head of Policy, Chris Norris.

Now, a group of landlords and letting agents are rallying against the proposed tax changes with a petition they’re calling ‘Say No To George’, accompanied by a website which goes into detail on how each new rule will affect agents, landlords and tenants, as well as homeowners, house builders, business owners and tradespeople.

“There are so many ordinary people who are going to be affected by this bizarre proposed law,” the website states. “The Chancellor says that what a Landlord is paying for the interest part of a monthly mortgage should not be allowed as a business cost. He calls it a tax break but in most cases it is a Landlord’s biggest expense on a property and is most definitely a business cost.”

The diatribe continues: “It’s a bit like the Chancellor deciding that a baker can’t offset the cost of his flour against his income. His flour is most definitely a business cost and is rightly allowed as so. He says that mortgage interest rate relief was abolished for homeowners years ago so wants to ‘level the playing field’. However he is forgetting that homeowners are not subject to Capital Gains Tax when they sell a property (but Landlords are) and private rented property provides homes for nearly 4 million people. It’s not just us this saying this. Many experts, including the Institute of Fiscal Studies say the Chancellor’s ‘line of argument is plain wrong’.”

As with any petition, it is unclear whether ‘Say No To George’ will affect any actual change, but it still might be worth letting the chancellor know that the entire private rental sector is pretty ticked off at him.

George Spencer is CEO at Rentify.

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