New tax rules could lead to many private buy to let investors being unfairly pushed into a higher tax bracket due to a set of ‘clearly false assumptions’.
The Residential Landlords Association (RLA) has spoken out against the introduction of new taxation rules for buy to let properties, claiming that with hindsight it is evident that they were based on false assumptions.
The RLA has calculated that around two thirds of individual landlords are only liable for the basic rate of income tax, based on government data. They therefore argue that this challenges the common concept that landlords are large businesses with large incomes and therefore have the ability to cope with tax hikes.
New Government figures have discovered that of the just over 1.9 million unincorporated individual landlords returning a self-assessment tax return, two thirds were in the basic rate bracket. A further 30 per cent were in the higher rate band whilst a mere 4 per cent paid the additional rate.
Separate research, also conducted by the NLA found that the proportion of landlords who own just a single property and who expect to moved up a tax bracket as a result of the changes has nearly doubled since the end of 2016. 16 per cent of landlords with one buy to let property now expect to be pushed up a bracket, a figure that is up 7 per cent in comparison to the final quarter of 2016.
This analysis comes following former member of the Bank of England’s Monetary Policy Committee, David Miles, arguing that the tax changes were likely to have a negative effect upon tenants as well as landlords due to diminishing supply and increased rents.
RLA Chairman, Alan Ward, commented on the findings: ‘The previous chancellor increased taxes on the private rented sector based on what are now clearly false assumptions. It is especially worrying that Ministers cannot tell how many properties, and therefore tenants, could potentially be adversely affected by their policies. We need more homes to rent to meet growing demand. It is time that the tax system encourages rather than stopped housing growth cold dead.’