Landlords won’t lose out under the new health and social care levy announced by Boris Johnson unless they have incorporated their business and pay themselves dividends.

Employees, employers and the self-employed will pay 1.25% more tax in the form of National Insurance from April 2022, while dividend tax will also increase by 1.25% to pay for the rising cost of social care.

Tim Stovold, head of tax at accountant Moore Kingston Smith, says that by limiting the National Insurance increases to earned income and the equivalent on dividends, rental income has escaped unscathed. 

He told FT Advisor: “Although there are already limitations for landlords on deductions for mortgage interest and the additional 3% stamp duty land tax charge for second properties, there is no additional attack on their rental profits.”

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However, landlords who chose to incorporate their portfolios into a company will be caught out, Stovold adds, because their rental income becomes a dividend.

Other tax advisors warn that the proposal will hit directors of limited companies who didn’t get any financial support during the pandemic and face seeing their income hit again just as the recovery is starting to take effect.

In the Commons debate on the new levy, Keir Starmer (pictured) criticised the government’s plans – singling out large landlords as particular beneficiaries.

He said: “It is a tax rise on young people, supermarket workers and nurses; a tax rise that means that a landlord renting out dozens of properties will not pay a penny more, but the tenants working in full-time jobs will.”

The Labour leader added: “We do need to ask those with the broadest shoulders to pay more, and that includes asking much more of wealthier people, including in respect of income from stocks, shares, dividends and property.”

6 COMMENTS

  1. What Keir Starmer chooses to ignore in his spiel is that the more private landlords get taxed, then the higher those workers whom he pretends to care so much for, rents will be higher to pay for the higher taxes.

    Of course, that would be such a nice headmine for him would it?

  2. I’m a landlord on a small pension who rents one property. I’m not rich by any standard. As a landlord I’ve had my tax burden squeezed already until the pips squeak. A labour government gives me sleepless nights for sure.

  3. According to Mirandus Accountants…
    “It is more common for landlords to operate through a limited company structure versus a self-employed sole trader or partnership set-up because income tax rates for individuals are higher than corporation tax rates for limited companies”

    Therefore, the MAJORITY of landlords will be hit by the tax rise, which is the total opposite of Starmers claims.

    Property ownership in general is viewed as a sign of success therefore property investors are viewed as very successful therefore very rich etc. doesn’t mean that is the reality but it sells well on the doorstep.
    This is the politics of envy from Starmer seeking to divide the nation not heal.

    Let’s be clear that the Conservative Party is no friend of property investors however labour have always been against anyone getting on in life and doing well. Whilst I understand the need for the Tories to consolidate the gains in the Red Wall they are actually becoming far more socialist than Blair ever was. (Without the International Wars thankfully)

    Landlords will never get a good hearing because the voting ratio works against them.

    A landlord has one vote, most of the properties that landlords rent out will have at least two voters.
    So an investor with one property has a 2-1 disadvantage in the voting stakes.
    A landlord with 10 properties has a 20-1 voting disparity, therefore as Obama once said “You will be at the back of the queue” when it comes to having the ear of govt but at the front when they need someone to vilify to deflect the bad light from themselves.

    During Brexit, Starmer tried his best to circumvent democracy and overturn the result of a fair and free referendum, he has to shake that off somehow and beating up landlords is a great tactic to paint himself as a saintly Robin Hood figure when in reality he was the Sheriff of Nottingham riding roughshod over process and the people.

    A recent Zoopla report said that the two big drivers for increased rents was the shortage of supply and the rise in demand. That will continue unabated as investors leave the PRS and immigration remains at over 300,000 per year. Those Lionhearts that stick with the PRS will enjoy better profits however they will need the lionhearts armour to protect them from hatred, slings and arrows from all sides.

    Don’t despair fellow investors it has its advantages, in a crowded bar if you want a seat just tell people you are a landlord and everyone will distance themselves, leaving lots of seating available 😊

  4. There is no doubt that for LL wishing to let on normal tenancies they will need a level of financial resilience unheard of and unrequired for ALL other businesses.

    For such LL they will be able to take advantage of a much reduced PRS combined with ever increasing demand.

    For many small LL the PRS business climate is simply unviable.

    The business logic of moving away from from normal tenancies is overwhelming.

    This of course DOESN’T assist the ever increasing tenant demand.

    I considered that tenant demand would decrease with BrExit.

    It seems I was wrong!!

    It seems no matter what the increased demand for rental property continues unabated.

    In such circumstances a normal market reaction would be for more investors to pile into the market.
    That is how capitalism works.

    Instead we have the bizarre situation where despite demand LL are leaving the sector.

    I’m one of them.

    The vast majority of these LL are making good profits yet they are now determined to stop letting on normal tenancies or just sell up.

    We all know the reasons that such LL are getting out of the AST market especially to single households.

    There are many more reasons arriving soon to add to the current reasons why many LL consider the risks are no longer worth it.

    Indeed that is my view.

    To remain a LL you need to be extremely well capitalised.

    I simple don’t understand how many LL have survived mass rent defaulting during the lockdown and eviction ban.

    Two months of rent default would have bankrupted me.

    So I don’t get how other LL were or are able to survive.

    They must have a magic money tree which unfortunately I don’t have.

    Inevitably the PRS will continue to reduce in capacity.

    This will only change if the onerous penal policies that have been introduced to the PRS over the past 7 years are abolished.

    I doubt any LL is holding their breath for that to occur!!

    Such LL are voting on how they believe things will go by voting with their feet!

  5. And why should landlords who don’t have it as a Ltd company pay. We are not entitled to any help (furlough, grants etc etc) pensions or benefits.

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