Leading economist slams ‘myth’ that landlords are under-taxed
Tax hikes for landlords will be damaging to the economy and are based on a lack of understanding about investors, according to a leading economist.
Paul Johnson, the former head of the Institute for Fiscal Studies, said that the UK “need[s] to think very carefully about how to tax housing and how to tax rental housing.”
“The first myth to bust is the idea… that somehow landlords are under-taxed relative to owner-occupiers, which is complete nonsense,” he said in “Listen up Landlords”, the National Residential Landlords Association’s (NRLA) podcast.
“If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent,” he added.
Applying national insurance on landlords’ rental income is one of many property taxes being examined by the Treasury ahead of November’s Autumn budget as the Chancellor looks to raise billions in extra income.
Officials are drawing up options that avoid breaking the “red lines” set by Reeves before the general election, where she promised to not raise taxes for ‘working people’.
But while taxing landlords “won’t lose the government many votes”, head of UK residential research at Knight Frank said it will “invariably end up hurting tenants”.
“With landlords already selling up ahead of the Renters’ Rights Bill and tougher green regulations, another disincentive would reduce supply further and put upwards pressure on rents,” he added.
Landlords under pressure
Private, smaller landlords, such as those who do not funnel their activity through a corporate structure, are under pressure from all sides: inflation, high interest rates and new regulations all impact small landlords more than larger ones.
Johnson urged the Government to set out a long-term plan for the taxation of housing and property, arguing that this would end “the sense that each year there’s a little bit of a budget deficit we need to look [to the private rented sector] for grabbing money.”
Ben Beadle, Chief Executive of the National Residential Landlords Association, said: “Ahead of the Budget the Government must heed Paul Johnson’s sage advice. Too often the way rental property is taxed is based on nothing more than topping up the coffers from one year to the next. Such knee jerk and short-term thinking is no way to run an economy.
“What is needed is a consistent tax strategy that gives responsible landlords the confidence to invest in the decent long-term homes for rent that so many people desperately need.”