Tax bills to double for younger landlords if Reeves imposes NI on rent income
Hamptons warns that National Insurance on rent is one of the 'more likely' changes to be made by Chancellor Rachel Reeves in this month's Budget.
Tax bills for typical landlords will double if Chancellor Rachel Reeves (main picture) introduces National Insurance on rental income, according to Hamptons.
In a briefing note ahead of this month’s Budget, the London agency also warns that the move will hit younger landlords under pension age the most.
Hamptons rates National Insurance on rental income as one of the ‘more likely’ changes the Chancellor could make.
Tax bill double
“Our analysis shows that a typical landlord earning £16,478 annually in rental income and paying £7,875 in mortgage interest, would see their tax bill more than double – from £699 to £1,609,” it says.
And “a higher-rate taxpayer would see their tax bill rise from £2,973 to £3,200, leaving just £295 in profit”.
One-third of landlords are over state pension age and would be exempt, while incorporated landlords would remain unaffected, Hamptons says.
Cliff edge
Capital Gains Tax on high value primary homes has a ’medium likelihood’ of happening, according to Hamptons.
A threshold at £1.5 million could create “a cliff edge in the market”, with “sellers pricing just below the limit to avoid tax, and buyers steering clear of homes that might tip them over”.
A Mansion Tax also has a ‘medium likelihood’ Hamptons believes. The most impacted would be owners and renters occupying £2m+ homes, mainly in London and the South.
Less likely
Less likely is an Annual Property Tax replacing Stamp Duty and Council Tax, with homeowners in wealthier markets likely to be worse off.
It would be collected by HMRC rather than local authorities, and 17% of households nationwide would pay more under a 0.48% annual tax.
And Stamp Duty shifted to sellers is also rated as ‘less likely’.
Help to Buy 2.0 is considered to be a ‘medium likelihood’, with adding a higher council tax band ‘more likely’.
If she puts NI on landlords and charges it on rent collected then there will be no PRS in twelve months if she puts it on profits then the amount collected will be negligible and offset by the increase in rents which ultimately means higher benefit claims. So basically a wrecked PRS for no fiscal gain.
In addition there will be a huge effect on the sales market as it will depress house prices as landlords sell to get out quickly.
Then with most small landlords leaving the market she needs to fund billions in social housing by either purchasing off landlords selling up or building and she has fiscal legroom to do either.
Unfair to leave the corporates alone but it the small landlord with one or two properties who do in the main an excellent job in housing people.
NI on rents may happen but if it does it shows they cannot think in the round and work out consequences and the impact will be quick and ugly for for many including my business.