A controversial proposal to scrap council tax, stamp duty and the bedroom tax, and replace them with a flat-rate tax paid by landlords rather than tenants, has been proposed by a leading think tank.

The Institute for Public Policy Research (IPPR) believes a proportional property tax would help to use existing housing stock more efficiently, rebalance property values across the country and increase spending among lower-income families – but it will hit landlords hard.

Pulling Down the Ladder: The case for a proportional property tax says higher taxes levied on more expensive properties in London and the South East could serve to reduce house prices in those areas, while most households would pay lower tax bills.

The IPPR labels the UK’s current system of property taxation unfair and outdated and believes it has not done enough to address the enormous increase in housing wealth that is primarily concentrated in London and the South East and has disproportionately benefitted the old and already wealthy.

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Proportional tax

Introducing a proportional property tax paid by property owners not renters – a flat tax of 0.48% on the current value of residential property – would shift responsibility for payment from tenants to landlords, while a higher rate of 0.96% would be charged for second homes, empty homes, and homes owned by non-UK residents.

It explains: “In terms of the incidence of the tax, this analysis assumes that the full benefit of the reduction in council tax will be borne by tenants, and that a portion of the proportional property tax bill will be passed on to tenants – 66% for private renters, and 25% for social renters.

“In reality, in the long run we might expect the incidence of both of these changes to be largely borne by property owners, rather than by tenants.”

Read more about landlord tax.

21 COMMENTS

  1. …..and 1,00s of residential lettings will merely move to holiday lets instead

    …..and any increase paid by landlords will be passed on by higher rents

    …..housing in London and the South East is so high because most investment is aimed at the London area – instead move Parliament out of London (cheaper than refurbing) to the Midlands, move Financial Institutions out of London to the North of England and those areas will see better employment and better housing opportunities too.

    …..but no, just send yet another problem to the LLs door (paid for by the Tenants anyway).

    • > housing in London and the South East is so high because

      People come to London, because of jobs and opportunities.

      What will all moving Parliament do? In a city of 9 million, what will moving a few thousand jobs do?

      People keep attacking London, but it subsidises the rest of the country.

      Attacking London, is just borne out of vindictiveness. The North destroyed their own industries and took their prosperity for granted.

      • “People keep attacking London, but it subsidises the rest of the country.”

        Please give me a single example of how the city of London is subsidising *ANYTHING* in the rest of the UK. Or do you perhaps mean “funding” rather than subsidising in *specific areas* of the UK, in which, yes, there are government based grants for certain things in specific circumstances available to the Local Authorities. However this is still not “subsidising” rather than the actual way government funding works…

        “Attacking London, is just borne out of vindictiveness. The North destroyed their own industries and took their prosperity for granted.”

        Wow….spoken like a “true Londoner”! Totally oblivious to anything happening further north than Essex. Tell me, is the level of education really so lacking in the UK’s capital city, or are you just here to troll?

        I smell something in your post, but idiots and Trolls tend to smell the same…

    • And capping rents isn’t going to work either as it will lead to a decimation of supply and mass homelessness.

      It has been tried more than once in the past with the same consequences.

  2. Seriously? where an earth do they find the people for these so called ‘think tanks’?

    I bet they have been paid a fortune of tax payers money to come up with that ‘idea’, I am pretty sure their not landlords though.

    The idea only benefits the Government, because if tenants don’t have to pay council tax, and the landlord does, then they will simply add the new tax onto the current rent, so everyone is still paying the same.

    However, the Government will love it because their guaranteed their money, if the tenant does not pay their new inflated rent, then the landlord still has to pay, and if they do not, they take their property.

    How is that a much ‘fairer’ system?

  3. Where do they think Landlords money comes from? Surprise!!! It comes directly from tenants. Jeez! Who are these people ff$. Has no one thought of building more properties and tackling the population explosion? Talk about elephants in the room.

  4. I’m in the US and property tax is paid by the property owner, no council tax paid by the tenant, so I’m sure I don’t have the immediate opposition to it as some. It does make more sense to me administratively (and yes, property tax non-payment goes towards a lien and eventually gets paid when the property changes title or refinances). But as others comment rent is increased accordingly so no real difference to the tenant, though perhaps more cost for some if they had lower council tax rates for being single parent, elderly, etc.

    If this were the only “assault” on landlords I wouldn’t be too upset, but in conjunction with proposed end of Section 21 no-fault evictions, right to have pets (I really hate this one) and minimum EPC C band ratings, we’re expecting to quit the private rental market when our tenant (who has been outstanding) moves on.

    • Depends on what state you life in… Taxes vary hugely state to state.

      NH for example along with 35 other states has Zero inheritance Tax.

      Following the Ninja loan scandal that crippled the entire world the US now have very long term (Decades) fixed mortgages. In the uk a 5 year fix is a long term.

      Trying to compare US and US makes zero sense because of all of the variables involved but of course in creased burdens such as EPC rules etc will eventually remove all of the profit from the sector and will therefore result in capital flight to other investment vehicles.

      Investing in the PRS has zero to do with “Nice tenants” “Morals” etc its a business. If supermarkets had morals they would sell food as “Not for profit” Entities…. That’s not going to happen is is? Just as I’m never going to feel sorry for someone who is struggling to pay rent. The day i do that is the day i begin to go bust.

  5. If such policies were introduced LL would simply desert the AST sector or sell up.

    There is simply no way that LL will allow themselves to be treated as cash cows.

    It is bad enough already with S24 etc.

    For some bizarre reason Govt seems to believe that LL will choose to remain LL no matter what is thrown at them.

    Govt will find they have completely misunderstood the LL mindset.

    LL will give up on the AST sector.

    There is NO imperative for LL to remain AST LL.

    FHL and SA is far more attractive

  6. It seems every problem is being dumped on Landlords.

    Climate Change should be the responsibility of every household, instead landlords are set impossible targets with EPCs.

    I have seen my taxes go up with Section 24. How much more taxes should go up?

    Whist there are some multinational who paid pennies to the pound in taxes. Landlords are being taken to the town. A big hedge fund can be a £1bn commercial building and sell it off and pay peanuts in tax.

    Local councils are introducing landlord licensing, which is another expense….

    • The PRS makes up around 20% of housing – given that the average ratio of renters to property is going to be around 1:3, around 6-7% of property is PRS. So even if all landlords complied with the EPC C, 93-94% of property is not affected by this prospective ruling.

      Add to that the fact that a large proportion of the sub-C PRS property is uneconomic to get to C then a large chunk of those 6-7% will be sold as they are, so now you are down to maybe 3% of housing stock? Just a further farcical and discriminatory anti-landlord measure from the Red Tories.

  7. So, my tenant no longer has to pay £100 a month council tax and I have to pay £100 a month landlord tax. My tenant’s rent will be going up by £100 a month! What does that achieve?

    • Security of income for the Council is achieved. Unpaid council tax is difficult and expensive to try and collect from a defaulting tenant, with no assets.
      Much easier to have someone with an asset, that can be liened, as the liable party.

  8. It’s an “attack” on the young, the single, and the elderly. It’s such a broad brush proposal that it won’t be able to take into account the needs of less well-off tenants.
    If it’s all dumped on the landlord it will be passed on in the rent with no allowance for single occupancy.
    If the financial risk to the LL increases due to having to pay this extra tax, LLs will be even less likely to take on other than financially rock-solid tenants. The removal of section 21 will also boost this trend.
    90% of tenants are great but scroungers will love this proposal. At the moment Council Tax is fast-tracked in the courts (at a lower cost) which is a deterrent to non-payment. The cost of this will eventually be passed on to the good tenants.
    The bad tenants will be unable to get PRS property so will add to the social housing problem. The social housing sector will get extra government handouts as a sticking plaster. Oh and the politicians will blame LL’s for the mess.
    The extra work this and the end of section 21, would make the farce of the court “system” even worse.
    Solicitors will love it. Don’t a lot of politicians have a “Law” background.

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