Possible tax hikes on the private rented sector are “economically damaging” and based on a lack of understanding about investors according to a leading economist.
The comments ahead of the November Budget were made by Paul Johnson, the former head of the Institute for Fiscal Studies, in the latest edition of “Listen up Landlords”, the National Residential Landlords Association’s (NRLA) podcast
Speaking to association chief executive Ben Beadle, Johnson – who is now Provost at The Queen’s College – spoke of his frustration at the way tax policy related to rented housing is made.
“I think you need to think very carefully about how to tax housing and how to tax rental housing, and the first myth to bust is the idea… that somehow landlords are under-taxed relative to owner-occupiers, which is complete nonsense,” he said. “If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent.”
He urged the Government to set out a long-term plan for the taxation of housing and property, and to maintain it consistently over the years ahead. That, he argued, would end the “uncertainty and 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.”
At the heart of his proposals was a call to scrap stamp duty altogether, dubbing it “the worst tax we have,” adding, “If I were chancellor for the day, I would abolish it”.
Arguing that there is a “strong case” for equalising Capital Gains Tax (CGT) with income tax rates, Johnson warned that such a move must avoid charging CGT simply on inflation. Calling for a tax-free allowance to enable a “normal return”, he suggested this should be set at the rate of inflation plus two or three per cent, with CGT then paid on any further returns.
Beadle comments: “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.”
This article is taken from Landlord Today