Finance Bill

Written evidence submitted by Chris Cooper (FB 56)


The proposed changes to restrict tax relief on buy to let mortgages will not achieve the Government’s stated aims, and the reasons given for introducing the changes are misleading, incorrect and untrue.

Personal Circumstances

As my pension was unlikely to pay enough in retirement without relying on State aid, I decided to take responsibility for my own future needs by starting a small property investment business. It has been hard work, entailed risk and I have used a large portion of my savings. It is a business which must be viewed long term, and therefore when the goal posts are moved to an extent which makes the whole business unviable, how can that be fair?

All businesses are able to get tax relief on the interest paid on loans for stock / product wholly related to that business. My stock is a property, the loan for which (unless you are very wealthy) is wholly, and necessarily incurred in the purchase of that stock. How can it be fair to discriminate between my business and every other business based in the UK?

The Government, in justifying the move, has compared landlords to owner occupiers, and stated that restricting a tax relief that owner occupiers do not have makes the system fairer. However, owner occupiers do not have to pay Capital Gains Tax on the sale of their home, whilst landlords do. Therefore, if the Government is changing the "advantage" enjoyed by one group to more closely match the position of the other, it would be more equitable to change the whole position where perceived imbalance exists.

I have planned very carefully for my retirement, so as not to be a burden on anyone else including the Government. However, it seems that all that hard work may have been a waste of time and effort. I can only assume one of two things: either the rationale behind making such a decision, and the consequences of it were not fully understood (entirely possible considering that statements made by the Government and HMRC are completely inaccurate). Or they were fully understood, and the Government is  determined to destroy the livelihoods and / or pension provisions of an important / vital sector of society, most of whom would have voted for them recently.


1. Since a previous Conservative Government sold off the much of the Council housing stock, and since the workforce became more mobile, the shortfall in available rental properties has been provided by the private rental sector i.e. small landlords like myself. In fact most Councils have a scheme whereby landlords can lease the property to the Council for five, or so years so that the Council has enough stock to house their clients. One of the incentives to enter the business was that interest relief was to be treated like all other business borrowings. Bearing in mind that a long term view must be taken with such a business, I’m sure you can imagine the consequences of measures being introduced which leave the only realistic option for many to sell their properties, or raise rents.

· Landlords will be forced to raise rents to offset the measures imposed. Clearly this will hurt tenants.

· Less, or no, money will be available for repairs, leaving some tenants living in unsuitable circumstances.

· If a large number of landlords are forced to sell their properties, a large number of tenants will find themselves evicted, and as the rental stock will be diminishing rents will rise. I would need to sell all my properties, which will entail evicting fifteen tenants, some of whom have considered it their home for fourteen years.

· Some have said that if landlords sell en masse, then house prices will fall. Whilst this could be considered a good thing, who will buy those properties? It is unlikely to be first time buyers, because they still need to find a huge deposit for an averagely priced property. It is more likely to be cash rich investors and wealthy foreign investors. Therefore, house prices won’t fall by much.

So, the only group that the new measures are likely to help is rich cash investors and / or foreign investors. The two groups to which the new measures will cause immeasurable harm are tenants and landlords. I would hazard a guess that the majority of landlords are middle aged, Middle England, middle income Conservative voters.

Why would the Government attack the very people who would have made a significant contribution to ensuring that they were elected in the first place?

2. The new measures will not only affect the wealthiest landlords, as stated. The new measures will not affect wealthy landlords who either own their properties outright, free of any loan, and it will not affect large corporates who buy property, and arrange loans through a limited company. Statistics show that only one in three properties owned by landlords have a mortgage. It depends what the Government means by wealthy landlord, but wealth is usually determined by net worth; therefore it will not affect the wealthy landlords, who have no loan on their property.

The group that it will affect massively is the small landlord who has necessarily borrowed at a higher loan to value to purchase the property.

3. Mark Carney is concerned about the level of indebtedness of landlords with buy to let mortgages, and their ability to afford them. So the Government proposes to introduce some measures which will ensure that those very landlords cannot afford their mortgages, and will have no option but to raise rents (if possible), run their business at a loss (clearly unsustainable) or sell their properties (and evict tenants) if possible. If it is not possible to sell, their property will repossessed resulting in more indebtedness and / or bankruptcy. Surely, it makes no sense to introduce measures that create the one scenario which the Bank of England has major concerns about?

4. The Treasury has stated this measure will only affect one in five landlords - a pointless illustration, because approximately 80% of rental property is owned by 20% of landlords. Therefore a more meaningful illustration would be that 80% of rental property would be affected, and therefore affect a large number of tenants.

5. The new measures will move many landlords from being a basic rate tax payer to becoming a higher rate tax payer. If an individual is paid the UK average wage of approximately £26,000 per annum, and they have property that has a gross rental income of £17,000 per annum, then they will become higher rate tax payers by default. Effectively being taxed on turnover will mean that some landlords’ tax liability will exceed their net income, after all running costs are calculated. How can that possibly be fair?

6. The measures are discriminatory. Landlords will be the only business sector unable to claim tax relief on borrowings wholly and necessarily incurred in purchasing stock. It does not bring parity between home owners and landlords. Although home owners do not receive tax relief on the interest they pay, they do not pay Capital Gains Tax when they sell - landlords do. Therefore, why has the Government not restricted the amount of CGT payable by landlords on sales?

September 2015

Prepared 14th October 2015