It was better when they forgot all about the PRS

budget announcement falloutFor some people, (teachers and dare I say Tube staff)[1] the summer months are a time of winding down at work, quiet relaxation and holidays with family and/or friends. For the policy team at the NLA however, the last few months have been very eventful.

What are we playing at?

No we haven’t been gripped by Corbyn fever (we will save debates about rent controls and renters having a right to buy for another time) but instead inundated with new government policies on the PRS and correspondence from members asking what the NLA ‘is playing at’ and what we intend to do about the Chancellor’s tax bombshell.

We always welcome interaction with members, and we plan to use many of the examples of the impact on their personal finances they have sent us in our representations to the Treasury. However we might not take up some of the more radical suggestions of lobbying tactics, my favourite of which was that the UK’s leading membership organisation for landlords should never speak to the Government again on any issue concerning landlords until they capitulate.

That is because as well as the fallout from the Budget in the last few weeks we have had announcements on Right to Rent immigration checks, the consultation to replace the Wear and Tear Allowance, and a consultation (sorry, technical discussion paper – which just means we have less time to respond) from the DCLG on ‘Tackling Rogue Landlords and Improving the PRS’. All this from the party we criticised before the election for forgetting to mention the PRS at all in their manifesto.

We saw it coming

Members might be interested in our correspondence with the Treasury. We wrote to the Chancellor before and after the Budget, and the content of the response, from David Gauke MP, isn’t encouraging. In fact, the Minister at one point worryingly seems to think we should be pleased with the Budget in that they didn’t abolish mortgage interest tax relief all-together.

As well as displaying (what we hope is just) a poor sense of humour, he also shows a worrying lack of understanding of the PRS. Firstly he says that: “The Government does not expect this to have a large impact on either house prices or rent levels…”

Err…how do you think landlords are going to afford this massive tax hike? As with any other business, they will absorb what they can, but they will have no choice but to raise more revenue from their customers to cover the shortfall, i.e. raise rents.

The Minister then says that, “Only around 1 in 5 (18 per cent) of individual landlords are expected to pay more taxes.”

What the Minister does not mention is that:

  1. A large proportion of those 18 per cent are likely to own more than one property, hence face a massive tax hike.
  2. This move will take more landlords into the higher tax bracket.

The NLA agrees with the Minister that there should be a fair tax system. To that end we think that landlords should be treated on the same footing as comparable businesses and only be taxed on their profit, rather than the costs they incur as a result of making it their business to provide homes for people in the middle of a housing crisis.

Not shouting from the rooftops

We recognise that the loss of tax relief is a very important issue for members, and one that goes straight to the very viability of their business. Notwithstanding the other policy initiatives, it has been the major focus of the policy team for the past six weeks, and will continue to be.  There is a lot going on, but unlike some other campaign organisations, the NLA finds it is often counterproductive to give a running commentary of our lobbying efforts.

The NLA is of course meeting both HMRC and Treasury officials to make clear our opposition to the restricting of finance cost reliefs and talk through the ramifications of the policy as it stands, and to mitigate its effects on landlords. This is an NLA briefing paper we provided the Treasury ahead of our meeting.

We have also met with mortgage lenders about its effects on their stress testing and borrowing restrictions, and set up meetings with prominent MPs when the Commons comes back from Recess.

We will, as ever, keep members advised (that is if we haven’t been successful in applying to be a teacher / tube driver).

[1] Legal disclaimer: that was a joke – teachers and Tube staff both have very demanding jobs and deserve their holidays / rights in the workplace.   

4 thoughts on “It was better when they forgot all about the PRS

  1. The NLA briefing paper appears to be a very well written and thought out paper and I applaud the hard work that has gone into producing it. I would make the following comments:
    a) I would like to have seen content whereby the NLA CHALLENGE the treasury to provide a much more detailed explanation of exactly why they are introducing this removal of business expense. So far, I am only reading that this is being introduced to “level the playing field with home owners” I would push for a COMPREHENSIVE EXPLANATION of this point as we all know it’s a ridiculous statement, and as they produce their explanation, the stupidity of their suggestions would become even more apparent. If they just want extra tax then force them to say so.
    b) I would like to have seen content whereby the NLA challenge the treasury about the revised method of actually calculating taxable profit, this will be changed in future so that ALL FINANCE COSTS WILL BE EXCLUDED IN THE CALCULATION OF PROFIT and any interest expense tax relief ONLY APPLIED AFTER THE CALCULATION OF TAX HAS BEEN CALCULATED. This revised calculation of profit will throw / push ordinary tax payers into becoming higher rate tax payers, higher rate tax payers will be pushed over the £100k tax limit and so lose their personal allowance and higher rate tax payers will be pushed into becoming additional rate tax payers and pay 45% tax.

  2. Re: the radical lobbying suggestion as noted above: “However we might not take up some of the more radical suggestions of lobbying tactics, my favourite of which was that the UK’s leading membership organisation for landlords should never speak to the Government again on any issue concerning landlords until they capitulate”. I don’t think that this is such a bad idea. I think the writer meant that the NLA would boycott the government if talks and negotiation failed, this a valid and strategic movement and perhaps you should run it past your members on your next email survey.
    I would also like to make a radical suggestion that you can add to your briefing notes that you take to the treasury: As this new tax is primarily being introduced to “level the playing field with homeowners” and APPARENTLY not about creating extra revenue income, then can I suggest that ALL of the income that is collected in the form of this new tax be donated to charities that the NLA and RLA would choose. I would first of all like to see at least 10% of the tax revenue go the NLA and the RLA each! They can use this money to offer free training courses to to their member landlords and for lobbying and fighting legal cases. At least some of the money is going back into the landlord system for the greater good of residential letting. The charities that the NLA and RLA would support should not be housing related ie shelter, as housing is the government problem and they should be addressing the issue under their own merits. The charities that we would support would create a very different image of landlords.

  3. As Landlord provide a service like any other business, why are they being penalised for sticking their necks out in order to borrow money to be in a position to rent. Other business can claim interest on borrowing.

    If successive governments had continued with a social housing programme so there was not such a shortage of both rental and domestic housing, coupled with years of open immigration we would not be in this predicament.

  4. I will be calculating my increased costs and passing these costs on to my tenants by increasing their rent. By way of explanation as to the increase in rents, a covering letter will be sent to all my tenants describing it as an extraordinary rent increase forced upon myself as a result of being a Landlord, and punitive tax changes by the present government directed solely against Landlords.

    If every private Landlord in the UK did likewise then there will be thousands of tenants out there who will be very displeased, of whom many will voice there opinion in the media. We may not stop this tax change but hopefully this government will think twice before making Landlords their cash cows in future

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