In April 2017, new rules will come into effect that will unfairly tax landlords, reducing the number of homes available to rent in the UK and pushing rents up for tenants.
The buy-to-let tax change has been dubbed the “Tenant Tax” due to its ultimate impact upon renters; landlords will have to pay tax on their turnover rather than their profit, meaning they are taxed on a non-existent income that will push some into higher tax brackets and, for those on 75 per cent LTV financing, could make their investment loss-making. They will have no other option, therefore, than to raise rents.
The law has been a source of controversy since it was first announced in 2015. The private rented sector has been fighting back, with a group of landlords led by Steve Bolton and Chris Cooper seeking a judicial review to overturn the law, and industry groups lobbying politicians to reverse it.
The issue has been overshadowed in recent weeks by the UK’s EU referendum, but the vote for a Brexit has actually opened a new political window for major change. Since the result, David Cameron has said he will step down as Conservative Party leader, paving the way for a leadership contest between Theresa May, Andrea Leadsom, Michael Gove, Stephen Crabb and Liam Fox.
A new leader will also bring with them a new government cabinet, including a possible change from Chancellor George Osborne, which could see the government become more sympathetic towards landlords. Leadsom, for example, is a buy-to-let landlord herself.
So what can you do now to help axe the Tenant Tax?
Here are six simple steps to make a difference:
- Write to your MP
Writing to your MP about the tax change is an essential first step, as the majority of MPs will be unaware of the act, not to mention how it will impact the private rented sector. If enough pressure is put upon the government, then the rule may be scrapped or diluted. (An RLA guide to doing so is here.)
Lord Howard Flight, who spoke at a recent summit in London about the Tenant Tax, branded the rule as “misconceived”.
“Write very stridently to your MP and ask why he or her are going to do about it,” he urged around 600 attendees at the event. “It always works: if all MPs are having a good old battering about it, they will start to take things up.”
He suggested that a “realistic timetable” could be a year, however, until the “gist of the response” is evident.
- Raise awareness among landlords
Don’t want to wait that long? The Axe the Tenant Tax campaign is awaiting word back on its judicial review application right now. Many landlords, though, are still unaware of the law. Indeed, the majority of the UK’s 2 million landlords have just a handful of properties and are not thought to be engaged with landlord issues on a day-to-day basis. These landlords, however, are the ones who will be directly affected by the rule.
This is the time to make sure they are aware of both its impact and the legal challenge currently unfolding against it. Landlords who are aware can then help to pressurise the government into a u-turn, as well as support the judicial review.
“We need passionate advocates who want to make their case to MPs,” say the Tenant Tax campaign team, who can also help to brief landlords on how to make their case to MPs most effectively. (Email firstname.lastname@example.org for more information.)
- Raise awareness among tenants
Tenants will be just as badly hit by the new rule, with many buy-to-let investors forced to raise rents, which could leave renters facing higher bills or even homelessness, as house prices are already out of reach for many.
“Why is there always an ‘us and them’ mentality?” asks Steve Bolton. “Tenants