Extra tax for landlords

[Another2356]

Here is the rub, I earnt my money through PAYE and paid tax, I then invested what I earnt into property and now my investment is being taxed again but at a higher rate of tax! This does not feel fair and whilst in the past I’ve provided property at below market rates, moving forward I will not. Adjustments will now be made and hence again tenants will be impacted. Over the last 9 years, any rent increases I have made have simply covered the extra cost of managing a rental (tax, regulation & maintenance) my net profit has not increased, although the rents have. It’s the government who are creating the rent increase problems.

How will you do that if your renters don't want to leave and dont want to pay more? Short of a section 21, which you won't be able to at all soon, if your renters simply say no to increases will they not just go to a rolling contract at the current rate if no compromise is found?

If a landlord wants to sell the property, that is valid grounds for ending the tenancy under Section 8 of the Renters' Rights Act.

LLs on MN always seem to say they charge “below market rent” but obviously that’s not true of most LLs who do charge market rent.

Either way, it’s obvious that the solution is to charge more if the asset costs more to maintain. Not very nice for tenants I agree but it does seem like the government wants to actively dissuade smaller landlords. Whether that will help or hinder the housing market I have no idea. There did used to be a lot of amateur landlords and many of them weren’t great at meeting their obligations legal or moral so it’s good that those just playing at being LLs are discouraged.

However, there are good, smaller LLs too so it’s a shame for them & ultimately for their tenants who will end up shouldering the additional costs.

They can’t just refuse to pay
the increase; they need to challenge it through the legal process and a tribunal will make a determination.

@Another2356 completely agree. I was lucky enough to inherit a property that was already rented out. I haven’t sold as the tenants have been in well over 10 years, I have kept the rent as low as I can and charge to cover my costs, well below market value. When these tenants choose to leave I am considering selling but then I will be hit with more tax.

yes I am lucky to have inherited a property but my family member worked hard and hard work should be rewarded. Unfortunately it seems to be case it’s not and not working or having children is.

Yes you are correct about being taxed on gains, but not all the costs of having a BTL can be deducted, so technically LLs are taxed on gains but also taxed on some of the costs of the investment (most obvious interest payments on mortgages, but not limited to this).

My heart sank on reading about this. Our LL has only 4 properties and we already know that he struggles to keep up with it all on top of working full time. He's a bit crap as a LL (slow and forgets things but is a nice person) but we are paying a bit below market rate but I strongly suspect that he will now sell. We will probably have to pay £200+ more a month and it looks like we'll have to leave the area that we've lived in for more than 20 years.

Boiling frogs.

Not only the unfavourable legislation, increased taxes and maintenance charges but the old "capital appreciation will bail me out" is well and truly up the swanny as interest rates have risen.

Easy come easy go I guess.

These corporate landlords who will be ‘swooping in’ to ‘snap up’ the bargains will be doing nothing of the sort.
They are not interested in 100+ year old solid wall terrace houses, 1930’s semis, a flat above a shop, nor individual flats with onerous service charges. They won’t buy a place that needs a new kitchen, or a rewire etc etc.
Yes they will buy/commission a new block of flats, or buy a row of brand new terraces, or even a new estate, but they won’t be touching the old dross out there. That’s not their game.

@HoskinsChoice , the big corporations are the ones raking in the profits; not so much small private landlords. We are generally people who worked very hard all our lives and have scrimped and saved to provide ourselves with an income in our retirement. There are rogue landlords of course but we can offer a much more personal service and many of us do. I live 5 minutes drive from all but 1 of my properties and that one is only 20 minutes away. If our tenants have issues our phone is answered 24/7/365. We aim to rectify any issues the same day or as soon as humanly possible. Our properties are modern and regularly updated. We even had 1 tenant who was with us for over a quarter of a century he became very unwell and we were in contact with his GP and helped her by encouraging him to accept help. We kept an eye on him, got shopping and prescriptions for him and it was us who found him dead in his bed. We even went to his funeral.
Most of us are not monsters.

I don't see why running a rental property shouldn't be taxed - you are getting money from that, your property has value because of the infrastructure around it, it is recognised as yours thanks to land register and justice system, it's protected by the police.

Why shouldn't you participate on funding it?

we as a nation don’t want small time unprofessional landlords “investing” in an important business that can’t do professionally.

OP it’s 2%. Charged at your relevant rate of tax. Maybe £10,20 a month?!

Corporate landlords= mainly housing associations. Corporate profit making landlords are uncommon, although growing in some products (not particularly market rent though)

I don't agree. Look at some of the housing associations - they are shit landlords. I am no longer a landlord got out over the last 7 years. There are a great many very good small time landlords and a great many shit ones too. I'm glad I'm no longer in the game but corporate is not the way forward.

I have two rental properties which I rent at below market value and as above I will have to pass these costs on to my tenants. I don’t have an issue with the increase if I had been applied fairly but as it does not apply to corporations it is the smaller landlords such as myself who generally try to do right by their tenants who are impacted as usual

Hi OP. The additional tax continues the theme started by Jeremy Hunt whereby the perceived unfairness of income from employment being taxed at a higher rate than income received from investments and pensions. Hunt's plan was to gradually abolish NI to equalise income taxation. Reeves, being Labour, instead is increasing the tax from other income sources rather than allowing workers to keep more of there earnings.

I don't like tax increases, but I agree with the ambition to tax income from wealth the same as income from employment.

And, one final point. I don't see why landlords seem to think they should pay less tax on their income and capital gains than those who hold a portfolio of shares.

It frustrates me that the government are dead set in ensuring no one can better themselves or make a better life for themselves, while they all sit on money, investments, gold plated pensions and subsidised everything!

I live in a deprived area, I’ve worked as hard as I can all my life to get better jobs and to save, save, save. Others in a similar position to me have chosen to fritter their money, or perhaps plough it all into an expensive house or whatever.

I’ve saved mine meticulously, and have always planned to buy rental property. No desire to be a slum landlord, I want to provide comfortable housing, maintain the asset (because it would be mine ultimately so why wouldn’t I?) and be able to make my hard earned cash work for me, give me an income when I’m older so I don’t have to work into my fucking 70’s like the government want (and none of them will have to do!!). But all they do is put up brick walls to actively prevent people from bettering their lives and increasing their basic income by a little bit after a lot of hard work!

I’m so worried about this. We’ve been renting from our landlord for many years now and have always been good tenants. Our landlord has been very accommodating keeping our rent under market value. If it’s no longer in his best interest to keep the house then we could potentially lose our home.

Lloyds and Namoura Bank from Japan are hoovering up places for rent
Lloyds is now the biggest LL in the UK

As a LL you are already being taxed on your rental income, and I have no issue with that. We're now being asked to pay 2% over the odds.

This rankles when you tend to hold rents steady for sitting tenants (as we have always done), get gas and electrical inspections done as required, move promptly when repairs are needed, only make deductions on the deposit when someone moves out when they have seriously taken the piss (I've deducted once in 8 changeovers of tenant, and that one had unpaid rent and left a shambles behind) and generally do your utmost to NOT be a shitty, money-grubbing landlord...

ETA I was a tenant for almost a decade, so I know what it's like. I also remember the better landlords with a fair degree of gratitude, and those are the ones I try to emulate.

They don't want people to be independent. They don't want sources of income that enable people to quit work. They need people to remain working and paying regular tax and NI. They also need people to be in debt and preferably downtrodden.

I would remain working, I’ve done 23 years already and have at least 16 more even if I could get my desired “retirement fund” in place. Even then I might only go part time. But I’d like the choice!

I’d also still be paying tax on the income. Oh, and 5% stamp duty (which incidentally isn’t payable on any other type of investment). And I don’t mind paying tax on the income, but it’s being taxed to the point of meaning it’s almost no longer viable for a lot of people despite hard work and effort.

You’re right, and that’s what I was getting at. We’re trapped. We’re slaves who are destined to never have a life unless we get lucky. Because responsible decision making and meticulous planning can’t make us a living! You just have to hit it lucky as a football player (if you’re male) or a pop star or something. It’s literally depressing.

Same. I’m terrified my landlord will sell up too.

Not everyone can afford to buy or wants to buy.

theyll probably be bought up by commercial landlords charging a fortune for a crap service.

Sorry for the questions, I'm genuinely curious for our situation. My understanding was that all tenancies will just go to rolling tenancies. So if a section 21 isn't filed and the tenancy just moves to a rolling tenancy without a new contract, wouldn't they just be paying what they were before? Maybe I'm missing something. I have told our landlord that we aren't paying any increase, but we are certainly not paying below market rate and they have increased it every year. I should have pushed back more last time it happened, I just didn’t fully know my rights