BREAKING: wrong time to raise taxes, but I’m going after buy-to-let landlords anyway…
In an apparent re-run of Harold Wilson’s 1970s investment income tax surcharge, Labour plan to re-introduce such an additional layer of tax to what is termed “unearned income”.
The Wilson Labour government applied an investment income surcharge of 15% and kept the top rate on investment income at 90%. In 1974 the cut was partly reversed and the top rate on earned income was raised to 83%. With the investment income surcharge this raised the top rate on investment income to 98%, the highest permanent rate of tax ever applied in the UK.
In a speech in Lincoln on 18 February 1974, Dennis Healey, the then chancellor promised he would “squeeze property speculators until the pips squeak.” However, he later denied having used the phrase, whether as Shadow Chancellor of the Exchequer, from 1972 to 1974, or as Chancellor of the Exchequer, from 1974 to 1979, saying the Times newspaper may have misquoted him.
Proof of the pudding: it wasn’t long after (1976) Britain faced its worst ever financial crisis. The Labour government was forced to apply to the International Monetary Fund (IMF) to bail it out. An IMF loan was granted but the fund insisted on deep cuts in public expenditure, greatly affecting economic and social policy.
New tax on buy to let
Rachel Reeves yesterday said she would apply the extra layer of tax on buy-to-let and other investment income such as stocks and shares, but admitted ‘Now is the wrong time to raise taxes’
While criticising Boris Johnson for presiding over a “triple whammy” of tax rises, including an increase in National Insurance contributions, a freeze to income tax thresholds and higher council tax, she nevertheless proposed her own tax hike.
Speaking in Bury, Greater Manchester Ms Reeves was with Christian Wakeford the Tory MP who defected to Labour this week. Ms Reeves cited the increased pressure on families as energy prices increase and Britain heads for a cost of living crisis as the reason behind her bombshell revelation for landlords.
In another interview yesterday Ms Reeves said Labour would keep the NHS and social care dividend that the Tory Government plans, to be paid for by increasing National Insurance.
She said that to pay for the NHS dividend, instead Labour would increase taxes on buy-to-let properties and those who earn money from investments.
The tax will hit the elderly hardest
This new tax would have the effect of hitting elderly voters, those who, faced with zero returns on cash deposits, have have put their savings into property or the stock market.
A recent report from the University of York and the Nationwide Foundation found that a substantial number of “baby boomer” landlords were now “ageing out” of the rental market, and they are not being replaced at the same rate by younger landlords due to diminished returns and more stringent regulation.
This could mean that there are not enough rental homes to go around in future, especially for those tenants on lower incomes and who receive benefits. Another tax hike would simply accelerate this process further.
Ms Reeves went on:
“We’ve said that it’s not right that the only people who are being asked to contribute to the health and social care levy are those people who go out and work every day and the people who employ them. If you get your income from stocks and shares and dividends or a portfolio of buy-to-let properties, then you pay no additional tax whatsoever in this health and social care levy,” she stated.
However, according to research by the London School of Economics, buy-to-let landlords are most likely to be white collar professionals, 12 per cent of buy-to-let landlords are blue collar workers, while seven per cent are retired and use their property income as a pension. Young couples now make up 35 per cent of buy-to-let landlords in the UK.
The Laffer effect
History has shown that raising taxes too much discourages enterprise and puts a damper on economic growth. The Laffer effect takes its name from economist Arthur Laffer who developed the inverted “U” “Laffer Curve”, based on the economic principle that people will adjust their behaviour in the face of the incentives created by tax rates.
Higher taxes decrease the incentive to work and invest, compared to lower rates. If this effect is large enough, it means that at some point further increases in the rate will actually lead to a decrease in total tax revenue for the Treasury. For every type of tax there is a threshold rate above which the incentive to produce more diminishes, thereby reducing the amount of revenue the government receives.
Landlords already selling-up
With a desperate shortage of rental accommodation at reasonable prices, landlords are already selling up in large numbers as they feel the pain of existing taxes and government regulations. Another 15% of extra tax on top and the number of private rental homes for rent in Britain could drop dramatically.
According to the Nottingham Building Society almost a million landlords, more than a third of the total, will review their property portfolios this year, with the number planning to sell homes already outnumbering those planning to buy new ones. In some popular parts of the country a severe lack of rental homes has recently led to bidding wars.
Ms Reeves’ plan may well reduce the National Insurance the average worker pays, but if they don’t have a roof over their heads, they are likely to be far worse off.
Treasury sources told The Daily Telegraph that raising the required £12 billion for the national health and social care levy could only be achieved by increasing either NICs or income tax.
Ms Reeves replied to this by saying:
“Well, there’s lots of papers out there from different organisations that show you could do exactly that. We will set out our plans ahead of a general election, but it’s not right just to ask those people who go out to work for a living to pay higher taxes, especially at a time when the prices of everything are going up.”
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: wrong time to raise taxes, but I’m going after buy-to-let landlords anyway… | LandlordZONE.
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DWP promises waiting time cut in UC arrears repayments
The DWP plans to speed up repayment of arrears for tenants on Universal Credit next month, according to safeagent.
Landlords can currently wait up to nine weeks for arrears to be paid, but the DWP has told the accreditation scheme and other stakeholders that it plans to change its processing method and cut the timescale to about seven days. However, the changes will only apply to new rent arrears applications – safeagent reports that Direct Rent payments as well as Rent Arrears payments will continue to be processed separately.
Big difference
Isobel Thomson, safeagent’s chief executive, says the change will make a big difference to landlords who would know that in the event a tenant on Universal Credit falls into arrears that these will be paid quicker. She adds: “We look forward to the detail of the change when it is launched and well done to DWP for their work on this for the benefit of tenants, landlords and agents.”
![housing benefit](https://www.landlordzone.co.uk/wp-content/uploads/2020/12/bill-irvine.jpg)
Bill Irvine, at UC Advice & Advocacy, says there is currently a lag in payments when a landlord is awarded an Alternative Payment Arrangement (APA) or Managed Payment, which is caused by DWP using two separate systems. “One deals with the Managed Payment (monthly housing cost) which is calculated and paid on a calendar monthly basis, whereas the arrears element is calculated monthly but paid on a four-weekly cycle, 12 times a year,” he tells LandlordZONE. “Where an APA is awarded late in the tenant’s benefit assessment period, it can cause the arrears payment to miss the payment cycle and means a further wait of four weeks before payment is received. I suspect that’s what DWP is referring to and, if true, would represent progress.”
Wrongly refused
However, Irvine says landlords are still wrongly being refused APAs without explanation, as well as having APAs cancelled without warning or justification. He adds that the DWP could do much to improve its service including by suspending, rather than cancelling, payment when concerns arise over the legitimacy of continuing payments.
LandlordZONE has contacted the DWP for comment.
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – DWP promises waiting time cut in UC arrears repayments | LandlordZONE.
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Support grows for calls to include landlords in cladding fund
More pressure is being put on the government to rethink its decision to exclude buy-to-let landlords from receiving cladding support.
Communities Secretary Michael Gove revealed that landlords would not be included in the cladding remediation fund initiative; instead, funding will be targeted initially at owner-occupiers and that ‘negotiations…will explore whether this support should extend to other leaseholders such as landlords’.
No logical basis
The National Residential Landlords Association has already called for him not to ignore landlords, which Propertymark has now echoed. Timothy Douglas, policy and campaigns manager, says there is no logical basis on which they should be excluded. “Buy-to-let landlords are no more to blame and deserve justice just as much as any other leaseholder to ensure they are not penalised for simply being landlords,” says Douglas. “It’s vital that private rented sector landlords are included in the support.”
![michael gove](https://www.landlordzone.co.uk/wp-content/uploads/2021/09/michael-gove.jpg)
Yesterday, Michael Gove met developers to discuss how to pay for works to rectify cladding and fire safety issues; they have told the government they must not be the only ones to pay the potential £4bn cost of fixing fire safety problems in tower blocks. A Department for Levelling Up Housing & Communities spokesperson says: “The roundtable was attended by senior executives from the country’s biggest developers, and these representatives agreed leaseholders should not pay. We continue to engage with them to ensure they deliver a fully funded action plan by early March.”
Unsafe buildings
Nearly five years after the Grenfell Tower fire, 40% of buildings in England with the same type of cladding have not been made safe, new government figures show. In all, 481 buildings have been identified with Grenfell-style ACM cladding and are unlikely to meet building regulations.
©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Support grows for calls to include landlords in cladding fund | LandlordZONE.
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NRLA urges help for tenants as Universal Credit cuts bite
The National Residential Landlords Association (NRLA) has called for the Chancellor to end the housing benefit freeze and help the growing numbers of tenants who are struggling to pay rent.
A new YouGov poll of more than 1,000 private landlords across England and Wales found that of those who were either currently letting to a Universal Credit claimant, or who had done so last year, 9% had at least one tenant experiencing difficulties as a result of the £20 a week cut, following a temporary increase in response to the pandemic.
Gap in support
The NRLA points to government figures showing how 1,431,040 households in the private rented sector were receiving Universal Credit last August, with housing cost support (Local Housing Allowance) included in the payment. Of these, 788,832 (55%) had a gap between the support they received and their rent payments. It warns that this will only get worse as a result of the government’s decision last year to freeze in cash terms housing cost support and predicts that as a result, the level of benefit support available will be able to cover the rent on ever fewer properties.
As many households face a cost-of-living crisis, the NRLA argues that a benefits system which properly supports tenants is of critical importance; it wants the government to reverse its damaging decision to freeze the Local Housing Allowance rate and ensure it properly reflects market rents.
![nrla ben beadle new pic](https://www.landlordzone.co.uk/wp-content/uploads/2021/07/ben-beadle-new.jpg)
Broken system
NRLA chief executive Ben Beadle says it’s a broken system in desperate need of reform. “With households facing a cost-of-living squeeze, it is vital that the benefits system gives the protection that tenants deserve,” says Beadle. “That is why the Chancellor needs to end the housing benefit freeze as a matter of urgency. Without this, many tenants and landlords face an uncertain future about how to keep tenancies going.”
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87% of purchase price and 100% of development costs – HMO Case Study
Luke Casey, one of Property118’s recommended finance broker team has recently structured a bespoke development loan to provide 87% of the purchase price on day one along with the entire build costs on a portfolio of 10 properties being converted into HMOs.
View Full Article: 87% of purchase price and 100% of development costs – HMO Case Study
HMO Tenant Clarification Scenario?
I’m thinking about renting out my 2 double bedroom house in the future if we need to move for work. However, I’m trying to plan the economics of it for the different types of tenant make ups.
I am wondering about renting it out as a house share with: one couple and one single adult taking each of the bedrooms and then with shared Kitchen
View Full Article: HMO Tenant Clarification Scenario?
Universal Credit cuts hit landlords
9% of private landlords renting to Universal Credit claimants have experienced at least one tenant having difficulties paying their rent post the Government cut to Universal Credit by £20 a week following a temporary increase in response to the pandemic.
View Full Article: Universal Credit cuts hit landlords
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