"If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent"
- Paul Johnson - The Queen's College
Speculated tax hikes on the private rented sector are “economically damaging” and reflect a misunderstanding of investors, according to the former head of the Institute for Fiscal Studies, Paul Johnson.
Johnson, now provost at The Queen’s College, made the comments ahead of the November Budget in the latest edition of Listen up Landlords, the National Residential Landlords Association’s (NRLA) podcast. Speaking with NRLA chief executive Ben Beadle and co-host Richard Blanco, Johnson expressed frustration at the way tax policy affecting rented housing is made.
“I think you need to think very carefully about how to tax housing and how to tax rental housing, and the first myth to bust is the idea… that somehow landlords are under-taxed relative to owner-occupiers, which is complete nonsense,” he said. “If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent.”
Johnson urged the Government to establish a long-term plan for the taxation of housing and property, maintaining it consistently over the years. He argued that such an approach would end the “uncertainty and the sense that each year there's a little bit of a budget deficit we need to look [to the private rented sector] for grabbing money.”
At the heart of his proposals was a call to scrap stamp duty entirely, which he described as “the worst tax we have,” adding, “If I were chancellor for the day, I would abolish it.”
Johnson also addressed Capital Gains Tax (CGT), suggesting there is a “strong case” for equalising it with income tax rates. He warned that any change must avoid charging CGT on inflation alone. He proposed a tax-free allowance to enable a “normal return,” set at the rate of inflation plus two or three per cent, with CGT payable only on any additional gains.
Ben Beadle, chief executive of the NRLA, commented, “Ahead of the Budget, the Government must heed Paul Johnson’s sage advice. Too often, the way rental property is taxed is based on nothing more than topping up the coffers from one year to the next. Such knee-jerk and short-term thinking is no way to run an economy. What is needed is a consistent tax strategy that gives responsible landlords the confidence to invest in the decent long-term homes for rent that so many people desperately need.”
