Treasury's National Insurance plan would hit renters in the pocket
Increasing tax on landlords by applying National Insurance to rental income are amongst Treasury plans ahead of the budget, according to reports in The Times today.
According to the report ‘Labour insiders’ have described property income as a ‘significant potential extra source of funds’ as the chancellor tries to block a potential £40 billion black hole in public finances.
We have warned that, if the reports are correct, this could have a disastrous impact on the sector, coming, as it does on top of last year’s stamp duty increase on homes purchased to rent, and proposals that landlords should pay up to £15,000 per property on energy efficiency improvements.
The change, we argue, would lead to an inevitable increase in rents, hitting the very households the Government wants to protect.
And it isn’t just us saying that.
As Paul Johnson, former head of the Institute for Fiscal Studies concluded in no uncertain terms last year, “The more harshly that landlords are taxed, the higher rents will be.”
We have stressed that landlords need more support, not more taxation, not least as recent figures show that up to a million new rental homes will be needed in just over five years.
NRLA chief executive Ben Beadle said: “Further punitive tax hikes on the rental sector will lead only to rents going up, hitting the very households the Government wants to protect.
“It would come on top of last year’s increase to stamp duty on homes purchased to rent and proposals expecting landlords to pay up to £15,000 on energy efficiency improvements to properties.
“Analysis by Savills shows that up to a million new rental homes will be needed by 2031 to meet demand.
“Given this, the Chancellor should be using the tax system to encourage long term investment in new good quality rental housing. She should also heed the advice of the Committee on Fuel Poverty and reform the tax system to support investment in energy efficiency improvements.”
The National Insurance increase is one of a number of changes rumoured to be under consideration by the Treasury, and comes just a week after plans to replace stamp duty with national property tax and remove Capital Gains Tax relief for those selling high value homes were reported.
There have also been more long-standing rumours that Rachel Reeves could make further changes to Capital Gains Tax for landlords, to bring it in line with personal income tax bands.
We remain steadfast in our position, that constant chopping and changing when it comes to the way the private rented sector is taxed affects investment decisions and therefore the availability of rental homes.
If the Government goes too far, there will be no incentive to invest, leading to an even greater imbalance between supply and demand, with tenants the ones who will ultimately lose out.
