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Two thirds of landlords only pay basic rate of tax

Two thirds of landlords only pay basic rate of tax

| Overview

Two thirds of UK landlords are only liable to pay the basic rate of tax, according to new figures published by the Government.

The figures challenge the widespread belief that landlords are making large sums of money and that recent tax changes are fair and affordable to them.

The figures were published in response to a Parliamentary question by the Democratic Unionist Party (DUP) MP Jim Shannon and show that two thirds of the 1.9 million unincorporated landlords, that is those who own their properties in their own name, rather than through a limited company, are in the basic rate bracket.

30% were in the higher rate bracket and only 4% were earning enough to pay the additional rate.

In total 1,254,000 landlords are paying the basic rate of tax, 584,000 the higher rate and 82,000 the additional rate.

In her answer to the DUP question, the Treasury Minister, Mel Stride MP, also confirmed that landlords are taxed more than homeowners as they pay tax on their rental income, additional Stamp Duty and capital gains tax.

This data directly contradicts the assertion by the former Chancellor, George Osborne, that tax changes to the private rental sector were intended to level the playing field between buy to let and residential home buyers by removing unfair advantages for investors.

In response to another question the Treasury reasserted its estimate that only 20% of landlords will be affected by the phasing out of mortgage interest tax relief, but also confirmed that it has no estimate of how many properties, and therefore tenants, will be affected.

The Parliamentary questions on this subject were prompted by warnings from David Miles, a former member of the Bank of England’s Monetary Policy Committee, that the additional tax burden being placed on landlords would only lead to higher costs for tenants.

In a statement, the Residential Landlords Association said that the new data ‘killed off’ the justifications for Section 24.

David Smith, Policy Director at the RLA, said; “The previous Chancellor increased taxes on the private rented sector based on what are now clearly false assumptions.

“It is especially worrying that Ministers cannot tell how many properties, and therefore tenants, could potentially be adversely affected by their policies.
“We need more homes to rent to meet growing demand. It is time that the tax system encourages rather than stopped housing growth cold dead.”

If you’re a residential landlord concerned about the impact of recent tax reforms on your finances, contact Landlord Debt Advisory on 0161 222 4311 or online at landlorddebtadvisory.com.

Our team of property debt specialists offers a range of possible solutions based on your situation

Whatever your circumstances, the process starts with a case review. We will obtain all of the original documentation on your mortgage from your lender so we can assess your needs and work out the best way for us to help you

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