In his first Autumn Statement since being appointed Chancellor of the Exchequer in July, Philip Hammond missed the perfect opportunity to announce any amendment to or the repeal of Section 24, which will restrict landlords’ ability to deduct mortgage finance costs as a business expense from April 2017.
This is despite the comment he made about the tax system being fair, and in particular, how the taxation of different ways of working should be ‘fair between different individuals doing essentially the same work’.
Steve Bolton, Chairman of Platinum Property Partners and co-founder of Axe the Tenant Tax campaign, commented: “While Section 24 does not impact Platinum Property Partners directly, this Tenant Tax is still wholly unfair, and so it’s hugely disappointing that the Chancellor did not take the opportunity to abolish the policy, or at the very least, remove the retrospective nature of it.
“He said himself that that the tax system must be fair. Taxing individual landlords differently to corporations, in spite of both groups providing the same product and service, is just the opposite.
“It won’t work for anyone, especially tenants, and is discriminatory and unjust, which was one of the legal grounds on which we applied for a Judicial Review of Section 24.
“The impact of this Tenant Tax will be felt far and wide, and it would be a grave mistake, and highly embarrassing, for Philip Hammond to wait for the consequences to rear their ugly heads before taking action.
“The Axe the Tenant Tax coalition will now continue to pile on the political pressure between now and the next Budget, with the aim of abolishing this ludicrous and unfair legislation that will do nothing to build a housing market that works for everyone, as the Chancellor stated.”
In addition, Hammond launched another attack on the Private Rented Sector by announcing that letting agent fees, such as administration and referencing costs, will be abolished for tenants.
Instead, he stated: “Landlords appoint letting agents and landlords should meet their fees.”
This is good news for tenants, whose fees to letting agents can amount to hundreds of pounds before they’ve even moved into the property. But for the most part, letting agents already work to slim margins, as do many private landlords, and this could be a real threat to their businesses.
Steve Bolton added: “Any measures introduced to save tenants costs is welcome. However, shifting this cost to landlords will only put more pressure on the Private Rented Sector and potentially increase rents for tenants in the long-term.
“Landlords in the Platinum Property Partners network rarely use the services of letting agents, but in the wider market, this proposal could result in a huge reduction of business for letting agents. Many landlords who are currently hands-off will probably take over the management of their tenants and property portfolios themselves in a bid to save costs.
“On the flip side, this could present and opportunity for landlords. Research from SpareRoom.co.uk has already revealed that the majority of tenants prefer to deal directly with their landlord, who typically charge lower fees or none at all compared with letting agents. And at a time of rising running costs and imminent higher tax bills for landlords, this could be a good move.”
