Commons treasury select committee slams Osborne's buy-to-let tax changes
Thursday 03 March 2016
George Osborne’s plans for a 3 per cent increase in stamp duty on buy-to-let homes have been slammed by economists giving evidence to the commons treasury select committee.
The measures, introduced in the November Spending Review, will mean landlords having to shell out thousands of extra pounds each year and have left many torn between selling-up and putting up rents.
During his Autumn Statement speech Osborne said the move was intended to prevent increasing numbers of properties being snapped up by buy-to-let investors, who were fuelling rocketing house prices and ‘squeezing out families who can’t afford to buy.’
Lack of supply to blame for house prices, not landlords
But the gathering of economic experts at Westminster was unanimously agreed that lack of supply, not landlords, was to blame for sky-high house prices.
And when asked about what impact the stamp duty surcharge would have on the housing market, damning responses flew in from all directions.
Paul Johnson, Director of the Institute for Fiscal Studies, said, ‘for those who end up in the rental sector, it can only push the rent one way, and that is up’, while the committee also heard excerpts from the Council of Mortgage Lenders’ response to the Government’s consultation on the design of the surcharge.
Their statement read that ‘turnover of the UK housing stock is already only half the level of a generation ago’, going on to argue that in London and the south-east extra costs incurred by the stamp duty surcharge would be passed on by landlords to tenants through higher rental charges.
Government is wrong about buy-to-let mortgage tax relief
Paul Johnson also fired a shot across the Government’s bow over the much-hated buy-to-let mortgage tax relief cuts, set to come into force in April.
The plans mean landlords will no longer be able to deduct the interest they pay on mortgages before calculating income tax and leave them worse-off by thousands of pounds each year as many are pushed into the higher-rate tax bracket.
Mr Johnson said: “At present if you own a property which you let out to tenants you can set any mortgage interest costs against tax due on rent received.
“The budget red book states that this means, ‘the current tax system supports landlords over and above ordinary homeowners’, and that it ‘puts investing in a rental property at an advantage’.”
“This line of argument is plain wrong. Rental property is taxed more heavily than owner occupied property.
“There is a big problem in the property market making it difficult for young people to buy and pushing up rents. The problem is a lack of supply. This change will not solve that problem.”
There’s little doubt among landlords that if George Osborne ploughs ahead with his plans a long, hard look at the books will be needed.
But opposition to the measures has come from thick and fast from various quarters, including a legal challenge from Cherie Blair’s law firm and even members of his own party. It’s hard to imagine he’s not at least considered whether he is doing the right thing.
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