Increase irrational property taxes then wonder why the Buy-to Let rental sector grinds to an overpriced stop – Then legislate to make it worse! Brilliant!

The Government in its wisdom, reverse the tax laws for Buy to Let investors so that, instead of receiving rents and deducting expenses and interest, and then paying tax on the remnant (the actual income), they now have to pay the tax before deducting interest. 

(e.g. Previously, a flat generates £20,000 a year. The maintenance cost & management might be £5,000 and the debt £12,000.00 leaving £3,000. The £3,000 taxed at say 40% leaving the investor £1,800 per year. (Not an amazing investment but decent if you have more than one property and expect the sales market to rise over time). 

Now, a flat generates £20,000 a year. The maintenance cost & management might be £5,000 leaving £15,000 a year. Taxed at 40% giving HMRC £6,000 and leaving the investor £9,000 and debt of £12,000. Ultimately, leaving the investor with -£3,000.00). 

Thought the Government gained in the short term, faced with no real option Buy to let Investors have been selling their properties thus reducing the rental stock. 

A reduced rental stock means less properties available and ever increasing demand. More demand for fewer things drives the price up in any market. Cause and effect. 

Then the Government comes along, much like Dori from Finding Nemo and see that the market is sky high for rental properties. “How strange” they say, “What can we do about this?” they say. “I know”, says Dori “lets protect tenants from eviction. That way, we can slow price rises down and be popular with all the renters”. 

So the Buy to Let investor, licking his wounds and putting £3000 of his own salary into the property to avoid foreclosure can’t remarket his property and shift his old tenant, who won’t pay more rent, as the Government further gums up the sector and blames that greedy landlord. 

Don’t get me wrong, I’ve been on both ends of that equation. (Kicked out of a property because the owner felt that he might be able to get more rent than I was willing to pay). But surely the solution is to loosen planning laws, make the sector a desirable place to invest, reduce the bureaucracy and the barriers to entry and grow the sector. One might even say along traditional Conservative values rather than tax hikes and increasingly punitive legislation.  Cause and effect, isn’t rocket science!

https://www.ellisandco.co.uk/news/londons-rental-stock-down-44-since-2021

https://www.bbc.co.uk/news/uk-politics-65612842

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

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