The government has it in for private landlords, warns Steve Bolton, the leader of a legal campaign against what has been dubbed the “Tenant Tax”. He explains to us why that’s bad news for everyone.
The tax, which was introduced in last year’s Summer Budget without consultation, is the latest in a string of blows against the buy-to-let sector from the UK government. It will cut the amount that landlords can claim as tax relief on their mortgage interest. This will force them to pay tax on the rent they receive, rather than on what is left after they have paid their mortgage interest – an unfair change that undermines the fundamental principles of business expense and tax.
As a result, smaller landlords across the UK will suffer, with some pushed into higher tax brackets and others put out of business altogether.
Their options? Sell up or raise the rent, both bad news for tenants struggling to make ends meet.
“Landlords who are aware are already putting rents up, they’re thinking about selling,” Bolton tells TheMoveChannel.com in an exclusive interview.
“The government have been quite clever, pushing it out to 2017, phasing it in over three years.”
The law may not come into force until next year, but the industry is already fighting back.
Steve, the founder of Platinum Property Partners, which helps thousands of workers live in high quality, affordable accommodation, has teamed up with fellow landlord Chris Cooper to overturn the tax. After a record-breaking crowdfunding initiative in January, the Tenant Tax campaign – with the support of Omnia Strategy, Cherie Blair’s law firm – is seeking a Judicial Review of Section 24 of the Finance Act 2015.
“I don’t care if HMRC don’t like what we’re saying, or if we’re not politically correct in what we’re doing,” he says. “We need to fight back.”
The legal challenge arrives as the government places a growing emphasis on homeownership and the build-to-rent sector, an approach to the housing crisis that Bolton dismisses as “fundamentally flawed” and “out of touch”.
Indeed, with housing supply failing to meet demand, the private rented sector has played a major role in providing affordable accommodation to those who cannot afford to buy a home in recent years.
Yet Bolton reveals the government may not have researched the impact of the Tenant Tax upon them at all: “Right from the beginning, we asked HMRC and the Treasury to show us the impact on tenants. So far, we have been provided with nothing that shows the government has done any form of analysis of how this is going to affect rents and tenants and that sort of thing. It’s completely shocking. 9 million people live in private rented accommodation – a fairly large sector of society, really!”
The Tenant Tax campaign is feeling “confident”, he says, after submitting an initial application and then responding to a later rebuttal from HMRC and the Treasury. Now, they are waiting for the court to rule whether they have permission to proceed to a full Judicial Review hearing – and that’s when they will “crack on and prepare the full case”.
“No legal campaigns have raised as much money as quickly as the first campaign that we launched.”
All of that, though, will require money.
And so, the Tenant Tax campaign has launched a new crowdfunding initiative on CrowdJustice.
737 people donated to their last campaign, which reached £50,000 in a record number of days. This time around, momentum is building once again: within 24 hours, they reached 25 per cent of their £50,000 target, with £45,302 raised at the time of writing.
“The average donation last time was £68. We’re currently run at between 70 and 80 this time,” says Steve.
Once the initial target has been reached, the team has a second goal of £250,000 – “it’s that sort of money that you’re looking at to fight a Judicial Review without any major complications”.
Industry giants are also stepping in to back the battle, with Belvoir Lettings already donating £10,000.
Tenant Tax: The Summit
The campaign is stepping up another gear this June, with a Tenant Tax Summit in London. The event, held on 9th June at the ILEC Conference Centre, Earls Court, will bring together supporters of the campaign, with speakers ranging from Lord Howard Flight, a Conservative Life Peer, to representatives of SpareRoom.co.uk, PropertyTribes.com and even Kriss Akabusi MBE.
The athlete-turned-landlord is an “amazing speaker”, says Steve, and is “very kindly doing it free of charge” – a sign of just how passionate support for the campaign has become.
SpareRoom.co.uk will bring research from their users to represent the tenant view on the situation – “they see that symbiotic relationship that has to exist”, comments Steve.
The event is partly designed to bring in corporate sponsors that will help to boost campaign funds, but that message is just as important.
“I’d rather have thousands of smaller people donating smaller amounts because it raises awareness,” says Steve. “What I want people to go away from that day with is not just the facts, the knowledge and the information, but a sense of we can do something about this. We can achieve what many people might think is impossible by working on this together.”
“This is as much about the legal challenge as it is the PR and political battle.”
That sentiment is summed up by the campaign’s recent name change to “Tenant Tax”, which came about following a consultation with branding experts.
“The key point is it is going to be tenants affected as well as landlords,” explains Steve. “Why is there always an ‘us and them’ mentality between tenants and landlords? That’s a narrative that needs to change. You see all the ‘Tenants from Hell’ and ‘Landlords from Hell’ TV programmes… I think the media has a responsibility, as does the government, as do the landlords, to try and change that narrative.”
“Most tenants think landlords are making loads of money and that’s not the case,” he continues. “The millionaires with the massive property portfolios, they’re in the minority. Mostly, its average, hard-working buy-to-let landlords who have got one, two, three or four properties.”
Indeed, buy-to-let has become a popular form of investment for pensioners in the UK. Almost three quarters (72 per cent) of those who have invested say they will struggle to make ends meet without that income, according to a poll by Responsible Equity Release.
Bringing the industry together
If the Tenant Tax campaign does fail, it certainly won’t be for want of trying. And bringing landlords and tenants closer together will be some compensation for the damage wrought by the tax change, says Steve.
“We want to leave something positive and lasting with what we’re doing,” he assures, who hopes that the National Landlords Association (NLA), Residential Landlords Association (RLA) and Association of Residential Letting Agents (ARLA) will become more united as a result.
Those groups have met with the Chancellor several times and lobbied for change, but the government is under what Bolton has labelled “a relentless shock-and-awe campaign” against landlords, from the Tenant Tax to the stamp duty surcharge on additional home purchases. The Bank of England is considering tightening buy-to-let lending too.
“They don’t know what they’re doing,” cautions Steve. “The impact and the knock-on effect is going to be catastrophic.”
The industry bodies have lobbyists and political connections, he acknowledges. “We don’t have any of that. What we want to do is get the national media involved, shout from the rooftops, show them we’re a force to be reckoned with.”
“I’d love the representative organisations to collaborate better to represent the views of landlords, of tenants, of the industry as a whole,” he continues. “I don’t see enough representation of tenants and enough being done by the industry to actually break down some of those barriers.”
With over 1,000 press articles in the last six months and crowdfunding records broken, a lot of people certainly share that vision.
All of this might have never have happened, though: the worst case scenario came very close to coming true, reveals Steve.
“We only just made the deadline for a judicial review,” he admits. “It was very touch and go and we had to respond very quickly and if we had missed that window, we’d all be sitting here saying ‘Well, it’s done’ and it would’ve taken a government to overturn that in the future when they see the horrendous effects that it’s going to cause.”
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Support the Tenant Tax campaign at www.tenanttax.co.uk.
Tickets for the summit are currently available to those who pledge £100 or more to the cause, although the event will also be professionally recorded so that people who can’t make it can watch.