Finance Bill

Written evidence submitted by Rachel Baker (FB 51)

1. I am making a submission in relation to the proposed changes to tax payable by residential landlords under the Finance Bill 2015-16.

2. The changes proposed will artificially define many landlords as higher rate tax payers, resulting in them having to pay more tax than money received, forcing small landlords out of the market thereby bolstering larger properties and pushing rents up further.

3. I, with my husband, am a residential landlord with nine properties in London. All of the properties were purchased with buy to let mortgages. Eight of the nine properties are let to families receiving housing benefit to pay all or part of their rent.

4. The rents we charge have never increased beyond the Local Housing Allowance for any of our tenants and for some it is less. In respect of all of these properties we are aware that we could evict our present tenants and gain higher rents in the private market. We decided not to do this on both moral grounds and also because our business works satisfactorily for us.

5. Presently our income is not high enough to take us into the higher rate tax bracket. However the effect of the proposed change will be to assess our income on the basis of the gross rent we receive (without deducting the nine interest only mortgages we pay) and we will then be taxed at the higher rate. No other business is taxed on gross income rather than net. It is astonishing that this is being proposed and the effect will be that we would be paying more tax than money received.

6. If these changes occur we would be forced to sell our properties, as we cannot operate at a loss. Nine families would be evicted. We are only one of many landlords who will face the same problem as us.

7. I am certain that many landlords, like us, will have to sell, or increase rents. The option of allowing tenants to stay paying only the level of rent equivalent to the Local Housing Allowance cannot continue. This will put even more pressure on low income families and will drive them out of London.

8. The lack of housing in London is a huge problem. We let through Southwark, Lambeth, and Lewisham and I am very aware how in need these councils are for accommodation. It is very difficult seeing families so desperate to be housed when they come to view one of our properties, often having been for months in just one room in a hostel, and having to turn them down because we have so many applicants.

9. Small or buy-to-let landlords often take a more human view to letting and allow tenants to remain in properties without raising the rent. In fact many people in the private housing sector seek out private landlords rather than companies because they believe they provide a better service.

10. In contrast, property companies will still be able to deduct business expenses, such as loans, mortgages, before paying tax, These changes will bolster their share of the rental market as they will be able to step in when the smaller landlords are forced out. It also will reduce the tax received by the government as it is only payable at 18%. This seems absurd at a time when it claims money is at such short supply.

11. The changes proposed will have a devastating effect on the wrong people. It will not 'level the playing field for first time buyers' as suggested or solve the problem of rising rents or lack of affordable property. It will instead force reputable and fair landlords out of the market leaving the way open to companies to take over, increase rents, and erode housing provision for those on low incomes ever further.

12. I hope you will take on my concerns.

September 2015

Prepared 18th September 2015