Howard Flight, a Conservative peer, has attacked his own party’s changes to the buy-to-let sector.
Conservative Peer Attacks Buy-to-Let Tax Changes
Lord Flight, a former Conservative shadow chief secretary to the Treasury, has voiced his concerns over the forthcoming reforms to landlord taxes.
“I hope the Government will re-think its sudden attack on buy-to-let this summer and autumn,” he begins. “Otherwise, it risks the very crisis in the buy-to-let housing and lending markets of which the Governor of the Bank of England has recently warned.”
Flight warns that buy-to-let tax changes could cause a sharp decline in property prices, “if not a crash”.
He explains: “The only buy-to-let ‘tax advantage’ has been the ability for the interest cost [on buy-to-let mortgages] to be offset against an individual’s income to determine their tax bills – the very thing which the Finance Act measure has hit by limiting the tax deductibility of mortgage interest to a 20% tax rate.
“This will hit more modest buy-to-let investors the most, while many of the more sophisticated have their buy-to-let properties held via a company.”
Under the Finance Act 2015, buy-to-let mortgage interest tax relief will be cut, but landlords operating through a company will not be hit.
Additionally, from April, buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty on properties worth over £40,000.
Flight warns that these two tax changes together could “put thousands of tenants’ security at risk”, as landlords rush to evict tenants and sell their properties.
He explains the significance: “Buy-to-let has provided some three million homes for those not able yet to afford to buy their homes – especially in London.”
The article, published on the Conservative Home website, arrives just days after a major accountancy firm, KPMG, warned that these tax changes could push rent prices up.
It believes that developers could struggle to sell new build property due to high Stamp Duty costs for investors, causing the supply of rental homes to drop and therefore driving rent rises.
Read Lord Flight’s full article here: http://www.conservativehome.com/thecolumnists/2016/01/howard-flight-the-government-is-wrong-to-attack-buy-to-let.html