Maybe that would be taking it too far, but in his response to George Osborne’s Autumn Statement the Shadow Chancellor, John McDonnell, took inspiration from Chairman Mao.
He even went so far as to throw a copy of the infamous Little Red Book his way for advice.
Little could he have imagined that the Chancellor of the Exchequer had stolen a (long?) march on his opposite number by embracing an ancient and very nasty Chinese custom.
It would seem that Mr Osborne is a committed student of Chinese history and has managed to master and apply the ancient custom of ‘Lingchi’ – used for over a millennia in China until it was banned in 1905 – and otherwise known as the ‘death by a thousand cuts’.
Accordingly, one hundred and 10 years after falling out of favour the Chancellor and his colleagues have decided to resurrect the lingering death as a way of dealing with small landlords.
The lacerations started in the summer with the Chancellor’s Budget:
- Finance costs – tax relief gone
- Mortgage Interest – tax relief gone
- Wear and Tear – reforms to come
These led to other consequences:
- Landlords on low incomes forced into higher tax brackets
- Effective Income Tax rates above 100 per cent
- Moderate income households forced to sacrifice child benefit
- Owners of larger portfolios losing personal allowances.
The Home Office joined in:
- Immigration checks
- Increased sanctions & criminal offences
Next up Communities and Local Government:
- Restrictions on the use of s21
- Seemingly endless proposals for ‘prescribed information’
- Increased licensing of HMOs
And then back to the Treasury in time for the Autumn Statement where this week the Chancellor introduced what he described as “a tax on buy-to-lets and second homes”.
From next April, assuming the Government get their own way, landlords will be forced to pay Stamp Duty Land Tax (SDLT) at a rate 3 per cent higher than other purchasers.
In reality this means that an investment property bought today (November 2015) for £200,000 will incur an SDLT charge of £1,500. An effective rate of 0.8 per cent.
From April this will increase to a whopping £7,500, or in this case an effective rate of 3.75 per cent.
Even ignoring the efforts of the other departments of Government, which may be rationalised by other objectives, the Chancellor’s efforts will irrevocably alter the private rented sector.
For more information about the Autumn Statement see our briefing
Faced with the prospect of significant SDLT bills new acquisitions by small landlords will drop.
As a result of the Budget changes to finance relief existing portfolios held by individuals will become untenable – or drive accelerated rent inflation.
See our projections here.
So what’s next?
That is unclear. It is questionable that this is the end of the slicing. The Bank of England has been vocal about its concerns for the housing market and could yet make BTL lending more expensive and less available.
This Government has at least five more Budget Statements and four Autumn Statements before the 2020 election and there is still some revenue not yet re-classified as ‘profit’ for tax purposes.
What has been made clear is that the Government do not see small landlords playing a significant role in providing new housing. The target is larger commercial landlords and build-to-rent developments so far as renting is concerned – but ultimately home ownership is the prize for Osborne.
The mystery that remains is where these aspiring home owners of the future are supposed to live while Mr Osborne plans for 2020.
Perhaps that’s why he decided to increase funding to tackle homelessness…..