Release the Thumb Screws on Buy to Let Investors

Monday February 22, 2016

Buy-to-let investors are being hit very hard by a series of new rules that will place enormous financial burden on their operations. It’s a real shame because the measures are not going to suddenly resolve the country’s housing shortage.

Landlords appear to have become easy targets. Somewhere along the line, successive Governments have perpetuated this strange perception that all property landlords sit playing with piles of money earned by ruthlessly exploiting their tenants. I’m afraid this couldn’t be further from the truth.

Like so many of us, landlords are hard working and are dedicated to successfully running their chosen line of business. They have to look after their clients with dedicated service principles, provide a great product and price it competitively and accurately. That’s surely the same for any business, regardless of industry.

But now, there is a new law that will prevent a landlord deducting mortgage interest from their rental income. Essentially this means they are being taxed on turnover rather than profit. No other industry has to operate in this way. If they did, many would go bust.

Some landlords are so angry with the laws that they have retained Omnia Strategy (Cherie Blair’s law firm, ironically enough) to push for a Judicial Review of the law.

The policy unfairly discriminates against individual landlords by denying them the same rights as large-scale corporate and institutional landlords which can set their finance costs off against their income, and therefore be taxed only on their profit.

As if that’s not bad enough, the other new rule is on stamp duty. There is a new three percent stamp duty surcharge for anyone who buys a property that is not their main residence. Will this suddenly stop investment in rental property? No, of course it won’t. The private rental sector is the second largest form of housing in the country and it is growing.

What the measures are more likely to mean is that smaller landlords who operate ethically and genuinely and who care deeply about their tenants will struggle tremendously to be able to continue in the market.

It’s going to open the door for a new wave of larger, corporate landlords; ones who have the relevant financial clout to be able to maximise their market position. Who knows, one day the likes of Tesco or Google could be your landlord.

Wouldn’t that be great?