North Manchester Tenants set to bear the brunt of a government attack on landlords
In 2015, our ex chancellor, George Osborne, introduced measures apparently set to hit “the most wealthy” landlords in the market, actually in the cold light of day, the measured proposed do not touch the wealthy, they will massively affect the honest, hardworking regular people who own a handful of properties and their tenants.
The property market in and around Moston, Harpurhey and Blackley is one of the most up and coming hubs for investment, by citywide, regional and national levels our property prices are low, yet we can achieve market level rates for rentals. More and more people like you and me are seeing the value in investing in property as a long terms strategy for income into retirement.
However our ex-chancellor, George Osborne, had a huge gripe with small time investors and has put in place some rather discriminatory hurdles. In April 2017, new rules will come into effect that will unfairly tax landlords, reducing the number of homes available to rent and pushing rents up for tenants. This is not just a wider UK problem, I believe this will have a huge knock on effect in North Manchester and feel very strongly that we should all be taking action.
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. With the formation of the new government and George Osborne no longer our chancellor, we now have a greater opportunity than ever to have our voices heard in Westminster.
As a very basic example, Mr Jones works as a manager and earns £30,000 he owns 5 properties worth £100,000 that he rents out at £500/m and pays a £250/m mortgage on each property.
Right now his tax is calculated as Rental Income MINUS Cost = Profit = £3000 x 5. So he pays £3000 tax and earns £12000 (£1000/m)
Once the tenant tax comes in, Mr Jones, doesn’t change his circumstances but finds that his tax is calculated as: Rental Income = Profit. So he is pushed into high rate tax, and pays £15250 tax on his £15000 income, making a loss of £20/m
I don’t profess to be an accounting expert, but I do run a business and I know if that one day I’m earning £1000/m and the very next day I’m losing £20/m because of a tax change, then I’m going to have to raise my prices to bring myself back to earning money. Mr Jones is fictitious, he isn’t the “wealthiest” of landlords, he’s just a regular guy. His tenants aren’t paying less than a reasonable rate, they're also struggling wanting to save money to buy a place of their own.
In order for Mr Jones to continue making £1000/m he would have to raise rents on each property by £450/m. An unrealistic ask for his tenants to go from paying £500/m to £950/m just to appease the government.
As I have said in previous posts tenants in Harpurhey are already paying 38.1% of their salary in rent. Are the government expecting them now to pay 72.4% of their salary in rent?
We know that Manchester city council is set to build a further 25,000 homes over the next 10 years in the city, but also we know that our population is set to grow by 110,000, so already demand in the city is so high that those on the lowest incomes are being priced out of the market.
The ONLY option the government wants to leave us with is to bring in the wealthiest to buy up all the properties without mortgages, so rents can remain affordable. I do NOT want us to go back 200 years to living on lands a lord has granted us, I believe that homes should be affordable and I believe that we can put a stop to this unfair retroactive change in the law.
So what can you do now to help axe the Tenant Tax and continue making the North Manchester Property Market fair for all?
- Get Involved!
Visit the campaign page, and if you can pledge to help fund the judicial review
- Spread the word
Share this post, or share the campaign page or the videos or any information relating to the tenant tax
- Write to your MP
Why should tenants have to pay higher rents, to fund their landlords tax bill? This is by no means a greedy grab by landlords, it is a calculated effort by government to lock out small investors and pave the way for mass house buying by corporations.