UK Landlord Forum / Life

Many landlords (myself included) rely on not having to pay tax on loan interest.  All other businesses are able to do this.  Any other group of businesses would fight such damaging legislation.  Why aren't we fighting?  We were told that if you are not in the top tax bracket you would still be able to claim this as a business expense but when you fill in your tax form this does not seem to be the case.  There maybe as Jeremy Corbyn says billionaire landlords but they are not the landlords that will be hit by this.  Is there anyone else who would like to put their head above the parapet?   

It depends whether you view loan interest as a business expense or as a cost of investing in a business. The argument goes something like this: if you borrowed a hundred grand and used it to buy a load of shares in, say, BP, you wouldn't expect to get tax relief on the interest, so why should you get tax relief on money you borrow to fund an investment property? It just distorts the market, in the same way that MIRAS used to do until it was abolished in the 1990s.

Of course, the comeback to that is to say you're not just buying an investment: you're putting in the hours, getting your hands dirty, running a business, and you should have tax relief on the cost of financing an asset used in that business, just as you'd have tax relief on the interest if you were a widget-maker and you took out a loan to buy a new widget-making machine.

You can try writing to your MP. You can make that argument. You can make that argument until you're Tory blue in the face. It won't make a fat lot of difference because, firstly, while a lot of MPs are landlords, they mostly fall into the "investment" rather than the "business" camp, and, secondly, the Government needs to get some cash from somewhere, and nobody's going to be too upset if they get it from those greedy fat-cat private landlords, are they?

Incidentally, if you're relying on not having to pay tax on loan interest, there's something wrong with your business model.

Quote from: Peter on December 19, 2019, 05:16:44 PMWhy aren't we fighting?

Because Landlords tend to be individuals. We do not herd very well. Probably because there's something akin to a stigma of being a Landlord (especially in current times when the 'profession' is repeatedly vilified by all political parties)... and we want to stay on the down-low. Join an Association if you want to throw your money away. They are ridiculously inept at helping to 'shape' policy on behalf of Landlords... the people they employ must be extremely sub-par to fail quite so exhaustively. If you're quite so concerned about the impact... raise the rents aggressively until you decide you cannot squeeze any more. Of course... more rent = more tax.