The more I look at this, the more I am convinced that buy-to-let income isn’t being fairly taxed.
Fair taxation of BTL should be a pillar of Labour’s next manifesto (OK, subject to a little bit of cynical key marginal/swing voter analysis: are BTL landlords likely to affect the outcome of the election in key marginals? Don’t expect they are, but if so, shh… don’t put it in the manifesto but sneak it in in the first Budget).
Here’s my suggestion.
– Remove mortgage interest as an allowable expense against BTL rental income.
– Replace maintenance and repairs as an allowable expense with a single, flat allowance.
– Require that all BTL tenancies be notified to HMRC
– Provide that if a BTL tenancy isn’t notified, the tenants have security of tenure and can get the rent fixed by the Rent Tribunal.
– Tax all BTL income under Schedule A at the higher rate for taxpayers under State Pension age.
– Make letting agents responsible for deducting tax at source
– Let tenants search the HMRC website to check their landlord has registered the let.
– Make CGT chargeable on BTL homes when they stop being used for BTL, e.g. become someone’s main home.