National Landlords Association calls for TLC For Landlords

publication date: Mar 31, 2010
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author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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National Landlords Association calls for TLC For Landlords 

 
It was disappointing that there was nothing to encourage further investment in private residential accommodation in last week's budget. On top of no real incentives for Private Sector Landlords, we're having to deal with the over legislative threats currently hanging over landlords from Labour.

Recent Government figures* showed that between 2001 and 2008 the number of people renting increased from 2.1 million to 3.1 million. However, the current tax system actively discourages investment in rental accommodation by landlords. The NLA is looking to the Government to support the much needed growth in the private-rented sector by making changes to the tax system that will increase the availability of privately rented accommodation.

The NLA recommends for the future:-

Capital Gains Tax (CGT): Landlords should be entitled to utilise ‘roll-over’ relief to encourage reinvestment of released capital gains. The current exclusion of residential property from access to this relief discourages landlords from reinvesting and from long term business planning. Released gains could also be used for renovating and modernising housing stock.

Kate’s view: Anything that helps ensure landlords look at their properties as a business and plan for the long term is a good thing, but the government also needs to look after first time buyers, ensuring that they aren’t unfairly disadvantaged when competing to buy a property against an investor.

Stamp Duty Land Tax (SDLT): The ‘slab system’, whereby tax is calculated according to fixed rates in arbitrary price bands, should be immediately reformed. Unlike most taxes, SDLT is neither regressive nor progressive and leads to inevitable distortions in property prices. In addition, where landlords make multiple transactions, each property should be treated individually for the purposes of Stamp Duty and not, as in the current system, as one bulk transaction.

Kate’s view: The amount of SDLT paid by approximately 80% of people is 1% or less, SDLT is a good way of raising tax and UK rates are low versus many other countries. The only people who shouldn’t have to pay SDLT are First Time Buyers.

Value Added Tax (VAT): The VAT rate for renovations and home improvements should be reduced to the lowest possible rate of five per cent. Social landlords already benefit from significant funding provisions in order to meet targets for the provision of decent homes. Cost barriers should be removed which discourage landlords from modernising housing stock.

Kate’s view: This is a great idea and already works well in the self build market. Landlords should be actively encouraged to improve housing stock conditions and never penalised so anything they spend that improves the property should be tax deductable. A lower VAT will also hopefully help stimulate more much needed work for the construction and trade industries.

Council Tax: The way in which Council Tax is assessed for multi-occupancy dwellings varies greatly across the country. It causes unnecessary uncertainty among landlords and often leads to a failure to maximise affordable and much-needed accommodation. The NLA is calling for immediate Government clarification to ensure consistency across local authorities.

Kate’s view: Multi-occupancy dwellings, especially HMOs are not understood by any of the political parties properly. The legislation such as licencing, has so far done little to rid areas of ‘rogue’ landlords and yet more legislation is planned. The government doesn’t just need to look at the Council Tax, it must stop all future legislation in this sector and secure consistency amongst local authorities before doing anything else.

‘Rent-a-Room’ Scheme: The tax-free threshold for homeowners taking in lodgers should be extended from £4,250 to £9,000 per year in order to keep up with current rental prices. The NLA fully supports the Spareroom.co.uk ‘Raise the Roof’ Campaign which argues that the prospect of completing a tax return has become a major disincentive to homeowners who could provide much needed accommodation.

Kate’s view: I think this is a great idea. No-one loses at all. It’s a great way to help first time buyers who could rent to a friend, brilliant for anyone struggling to pay their mortgage!

For more commentary from Kate on property and the budget, contact kate@designsonproperty.co.uk.

* English Housing Survey: Communities and Local Government

 


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