As most of you know I spent the day with a couple of hundred landlords and property professionals on Thursday. This was as one of the founders of GB Landlords but also as a speaker on tax.
My talk was, as you’d expect a month before a budget, coached in a lot of caveats. The general feedback from the room was confusion and concern. A very common question after my talk was “So what should I do?”. The only thing I can say you should definitively be doing is considering your options carefully. Anyone that tells you what you should definitely be doing at the moment doesn’t understand tax at all. Equally if anyone pretends to understand the minds of politicians they should probably be taken away.
What do we know? I’d say nothing really. We’ve had assurances on some taxes but they don’t mean much for two reasons. First of all politicians change their minds more than I change my socks AND taxes can go up without changing the main rate of tax.
Unlike most I like it when politicians “U-turn”. It could be a sign that they have listened and changed their mind. That’s a good thing and should be applauded. More likely it means that they have been lying initially and then you see what they really wanted to do all along but let’s assume the best here.
How can taxes go up without a change in the main rate? In short – reliefs. If we can all agree that the main rate of tax haven’t changed much of late this means that all landlords must be paying essentially the same percentage of net profit as tax. We know that isn’t the case though. My 180% example from yesterday is proof that even with a 40% headline rate your tax bill can be much higher.
So even with assurances on income tax, national insurance and corporation tax will we could easily see these all go up. Also they’ve stressed that this is aimed squarely at “working people” whatever that means. I’d say it means people with a PAYE job. Train drivers for instance will likely be safe.
Who isn’t a working person then? Landlords are a good place to start! You might be super busy, and work harder than a lot of workers but property rental is an investment not a job for tax purposes. It would be a very easy sleight of hand to increase taxes for landlords and still claim to have upheld their manifesto pledge.
Controversial opinion here but as they clearly don’t like us anyway they could easily throw us under the bus and remove reliefs. For essential things like interest. George Osborne started this when he essentially halved the relief we get as individuals and Reeves could easily remove the other half.
Personally I think that would plunge property in to a black hole that it would take years to recover from so is unlikely for even the most ideologically based politician. Anyway Osborne’s dream of changing the bias of property purchasing has failed hasn’t? Landlords buy, I think, slightly more properties than they did prior to 2015 overall.
If the mission is to have less landlords, and to raise tax, then (and here is the bit you won’t like!) bringing in s24 for limited companies would achieve that better than anything else…