Quarter 3 In Focus: Landlords & Taxation
Introduction
This report forms one of two In Focus reports drawn from the Quarter 3 landlord survey, the other In Focus report considers possessions.
The 2020 Quarter 3 survey had 2,135 responses in total. Of these 1,897 completed this survey with an additional 238 part completions.
The fieldwork for this report was conducted in the autumn of 2020. Prior to the publication of this report, the results were used in the NRLA's briefing documents to HM Treasury and other Whitehall departments. These provided a landlord persective to inform Covid-19 response and in preparation for the 2021 Budget Statement held in March.
Many thanks to all who completed this survey.
2020 Qtr 3 Survey: Taxation & Landlords
Research findings
Landlords compared to other entrepreneurs
Most landlords pay tax as self-employed business owners via self-assessment, and only a small proportion use other business ownership models.
However, landlords are not treated in the same way in the tax system as other entrepreneurs and business owners. Landlords are presently being disadvantaged by a combination of increased regulation and a series of technical changes to tax allowances.
The research concludes that any further regulation and changes in tax which do not support landlords will ultimately mean increased rents and less choice for tenants as a consequence of a decrease in housing supply in the Private Rented Sector.
Better use of the tax system
The research reflects on the mixed record of the OBR to accurately forecast Capital Gains Tax (CGT) receipts.
The views of landlords expressed in this report leads the NRLA conclude CGT rises could have profoundly negative impacts for the Private Rented Sector. Instead of raising CGT rates, NRLA research suggests using allowances and reliefs creatively may yield more revenue for the Treasury by encouraging sales and purchases of property by landlords. The NRLA also suggest how CGT breaks could enable an acceptable form of "Right to Buy" for tenants in the PRS.
The conclusion is that raising CGT liabilities could have unintended consequences for the PRS.
Inheritance Tax (IHT) liabilities
A considerable proportion of landlords have decided to leave future IHT liabilities for heirs to resolve rather than attempt to engage in the complexities of this particular tax. Adding to these complexities may mean the Treasury again lower the supply of housing in the PRS in the pursuit of short term revenues.
