Axe the tax has failed so far

green tax
Oct 12 2016

Axe the tax has failed so far

I have been watching the attempt of landlords Steve Bolton and Chris Cooper to seek a Judicial Review of legislation reducing the mortgage interest tax relief for landlords

It saddens and outrages me to find out that the review has failed.

The landlords were represented by law firm Omnia Strategy LLP, led by Cherie Blair QC.

Bolton and Cooper said the outcome has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.

I cannot understand why the government cannot see that it will be tenants who are hit hardest. Due to forecasted rent increases from landlords passing on the tax or landlords selling up and then less availability of rental stock. It seems everyone can see the clear and direct consequence of this ludicrous legislation except the powers that have passed this legislation.

I foresee us being very busy with removing tenants from their homes and processing unnecessary evictions as vast numbers of landlords will be forced to exit the market and sell up. The market is made up of thousands of private hard-working, responsible landlords and now their pension plans in ruins. It seems the tax is allowing for unfair competition as the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.

It is good to read that neither gentlemen are giving up on their quest. Both said their goal is to abolish this tax or to remove the retrospective nature of it.

For those that would like to know the history of Steve Bolton and Chris Cooper legal argument.

The legal argument was based on the alleged discrimination against individual landlords contained in Section 24 of the Finance (No 2) Act 2015; the core of this section was the phased reduction of mortgage interest tax relief for landlords paying higher rates of income tax.

The allegation was that individual landlords were denied the same rights as, for example, large scale corporate and institutional landlords which can set their finance costs off against their income and be taxed only on their profit.

Cherie Blair described Section 24 as “manifestly unreasonable” with no evidence that landlords were effectively preventing first time buyers from purchasing homes – one of the reasons cited by former Chancellor George Osborne in his Budget in 2015 that introduced the mortgage interest tax relief change.

The campaign led by the landlords claimed individual buy to let investors would have to pay extra tax of 20 per cent or more of their mortgage interest payments. The tax they pay might be greater than their real profit, leaving them with a rental loss and a cash shortfall.

This tax would only have affected individuals who own rental properties in their own names, like the millions of small landlords in the UK. Companies owning buy to let property and wealthy cash investors were excluded from the tax.

Richard Lambert, chief executive of the National Landlords Association – which supported the action – said the decision was disappointing for landlords and tenants, who would now see their rents rise as a consequence of the changes to landlord taxation.

“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the Courts would be prepared at least to listen to the arguments. We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be a dramatic change to the ability of hard working people to provide homes for others” says Lambert.

“This issue has been the focus of the NLA’s lobbying for the past 15 months and, as the UK’s largest representative body for landlords, we are still committed to changing this damaging policy through political engagement and lobbying. We urge all landlords to join us in this fight.”


Final thought

It is clear that despite the demand for rental properties, maintain any form of profit is increasingly difficult to achieve due to ever increasing costs, lost income due to rogue tenants and low inflation and income maintains the same level. Landlords have seen anything from 30-40% in additional costs and many are now running at a loss.  This policy must be challenged and changed, private landlords need to join forces and lobby. It does seem that the government are targeting landlords as an easy route to collect tax. Why not make it an even playing field and have a tax system that also impacts on the large multi-national corporations and overseas property investors?

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  • Abigail Butler

    Totally agree with all of the above. Any signatures required on another petition – send it my way!

    12th October 2016 at 3:26 pm
    • shaun kerr

      This new tax law is, for me a final nail in the coffin of the buy to let sector. I have 80 properties all well tenanted and now I am going to move out the tenants and sell the properties.
      This new tax law is only the start – investors have already seen an increase in stamp duty and most lenders are looking at a raise from 125% uplift to 145% rental calculation based on 5.5%.
      Expect new rules in the coming months to strangle most property investors out of the market.
      It is estimated that between 5-8 million renters will be homeless.
      They started the French Revolution with less unjust than this. Take my advice and leave while the prices are strong. Come 2021 there will be a massive influx of properties on the market and supply & demand will tilt the wrong way for sellers.
      These laws seem to me to cause massive problems to investors and to those who want to buy their first home – no winners, only losers!

      4th November 2016 at 9:50 pm
  • Minesh Shah

    I know alway true thing get hurt but if the tax is every we’re and higher then the people stop working and economic get worse as a common way if we think if the tax is low then every love to work 7 day a week but because of high tax people don’t like to work extra hour in way one if is less tax people will earn more and spent more so in another way they are paying more tax but economic get better and unemployment will be less I am not expert but it’s common nature if you earn more you spent more other wise what you do with extra money buy something I know might my comment you don’t like but this is my way to think l am very sorry if I heart any one
    Thank’s all

    12th October 2016 at 6:51 pm
  • Jaclyn Beckwith

    How the heck do they expect landlords to be able to afford to maintain their properties. By the time you pay this extra tax, many properties will end up uninhabitable. There are many responsible caring landlords out there, why punish us like this? Many are just getting by now by trying to keep our rents down to help the young ones. Why are the wealthy with big companies being protected. I think this is a human right for the small landlords. Please please change this unfair tax. Thank you

    12th October 2016 at 9:14 pm
  • Nel S

    This can only change when tenants join this case as well in support of landlords.

    A landlord will only be forced to raise rents, which tenants will have to pay. Rents are too high already.

    And ultimately it is the government who will benefit, by getting more taxes of the increased rent. it is a cleverly thought out ploy to raise more taxes off tenants.

    12th October 2016 at 9:24 pm
  • Philip Savva

    If the Government really cared about the people, this is the last thing they would or should do, has landlords will have no choice but to UP the rents! So therefore it is the people who are struggling the most will suffer again, evictions will most definitely be up has the same people will struggle to meet rent increases, there will be homeless & more strain on councils to try & help these people, which we all know will not happen, as councils are no longer in a position to house people, so all I see is one big disaster .

    13th October 2016 at 8:12 am
  • Daniel Booth

    Ludicrous. Our industry is the only industry where the costs can not be offset against income. Osborne is an idiot. His attempt to push landlords out the market and flood the market with properties causing a housing price crash so that tenants can snap up properties on the cheep, will result in landlords passing the costs of this “tax” on to the tenant resulting in them being trapped in rental properties for ever because they will be unable to save for the deposit on their own home.

    13th October 2016 at 8:46 am
  • Christine walker

    This legislation has got to be abolished as it is already very difficult to rent a property in most parts of the country already,without rents rising,yet again,because of this tax.Why should individual landlords be treated any differently to any other business, after all it is a business to all intents and purposes,when someone has a loan ie:BTL mortgage to purchase a property/properties to let out.Why target the small individual landlord?

    13th October 2016 at 10:15 am
  • Tim Spring

    I have already written to you with my own comprehensive overview of being a private landlord. Many of us are actually not making any profits at all. I make a loss so continue to subsidise my tenants. This new legislation threatens so many people who act as good landlords who take care of their properties and their tenants yet they are now being treated as pariahs who feed on their poor unfortunate wretched occupants so we must be punished by higher taxes.
    Look ahead to the consequences and we can see how many landlords cannot charge sufficient rents to cover their extra costs – or risk voids – so many will have sold up. Those properties will thus be available to the ones with deeper pockets who can cope with such costs and charge higher rents anyway in what will be a tougher market for tenants.
    So who wins ? The Government? Or the bigger landlords? Certainly not the average landlords, most of whom are decent people who care for their tenants in order to help with their pensions. When all this is accomplished I foresee a disaster in waiting.

    13th October 2016 at 11:32 am
  • Forbes Kitchen

    Having 23 buy-to-let properties all on interest only loans, which puts me in jeapordy, especially if interest rates were to rise significantly. I was told 16 years ago that the rules were x y and z. Now they are changing the rules. This is completely unfair. At the very least should only apply to new buy-to-let.
    I have no confidence in any government, they are undemocratic sum bags. Looks like I’ll be in business with the purpose of paying the tax man, or go bust. What I might do is transfer my house out of my name, then defect on all my loans. The lenders will repossess the properties, the tenants will go to the council for a house. I’ll be bankrupt, and can sign on the dole, and preserve my child benefit as I’ll lose that when I become a higher rate taxpayer. Not to mention save myself on council tax by signing on social security. Not to mention having a stress free life.

    4th November 2016 at 1:58 pm
  • DNO

    I have 2,buy to let’s mortgages. That I rent out. Both are interest only mortgages. I am left with £150 and £150 from each once mortgage taken out. How will this new tax effect this ?? As new to all this???

    4th November 2016 at 4:06 pm

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