It’s good to take a short break from the exciting carnage on the stock market and sink some needle-sharp teeth into some egregious special interest pleading. Maybe I’ve be offered an opportunity to buy the FTSE100 below 6000 by the time I’ve finished this 🙂 5000 by the end of the day – or maybe next month… Happy days are here again
It’s an evil market all round, British property, and the Torygraph has taken up the cudgel on behalf of Britian’s overleveraged and undertaxed BTL investors
What is also becoming clear is that worst hit will be those modest, middle-class savers who have prudently chosen to invest in buy‑to‑let, often alongside pensions and Isas, as a means to supplement their income.
The mechanism of Mr Osborne’s tax attack is the removal of landlords’ ability to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax.
Let’s actually parse this bullshit, and translate it
Middle class savers seeing property as a one-way investment, borrowed shitloads of money they didn’t have to ‘invest’ in an illiquid asset class, and now whinge like drains that they can’t claim back tax on their borrowings. Some of them even whinge that their kids can’t get on the housing ladder without spotting the irony. (okay I added the last bit about their kids)
Well, welcome to the real ‘king world you greedy sons-of-bitches. I can’t waltz into a bank, borrow £200,000 and plunk it down on stocks, claiming back the tax I pay on the interest either. Diddums. Indeed, the horny-handed toilers who just want to buy a house to live in the damned thing don’t get to claim back the income tax they paid on the money they earned to pay the mortgage interest, so exactly why you demand the privilege so you can soak tenants better beats me. Once upon a time buyers could do that, it was called MIRAS and that was iced fifteen years ago because it simply led to higher house prices because people bid up to what they can afford.
Let’s hear it from Connie
I never thought that mortgage interest, which I regard as a cost, could be taxed as though it were profit.
How delightfully tragic, my dear. You know the poor little people you beat for the sale, you know, Joe and Josephine Smith who were actually going to buy that house to live in it? They were going to pay the tax on their mortgage interest, so WTF makes you such a special case, eh? I haven’t actually asked them, but I guess they also regard it as a cost, FFS.
The fundamental problem is that if you have to borrow money to ‘invest’ then you are a hair’s breadth away from destruction. Plus there’s the wider issue – exactly why were we tax-subsidising people to borrow money to royally screw up the already deeply borked housing market in this country?
There’s nothing fundamentally wrong with being a landlord, if you have the capital or your business model works given the cost of capital at normal commercial rates. But if you need tax breaks on the cost of capital to make your business model work, then you are being subsidised to piss on your tenants who can’t get that tax break, and it really is high time that perverse incentive is stopped. The Torygraph listed a whole load of special-interest pleading, but it’s basically on behalf of people who have invested in an undiversified, illiquid asset class on margin to become rentiers[ref]I don’t have a particular problem with people being rentiers, but you have to have capital to do it. If you can’t afford the entry ticket, then work for your living instead, rather than trying to arbitrage a tax-privileged borrowing situation relative to your tenants, because, well, you’re vulnerable to the loophole being closed ;)[/ref]. It’s just not the same as buying productive plant and machinery to make more widgets better, where I can see the case to setting interest paid against tax.
Undiversified, illiquid assets, and margin are not hallmarks of prudent middle-class savings, this isn’t something suitable for widows and orphans. If this is your retirement strategy and you’re an average grunt rather than Nathan Rothschild, and you think of it as prudent, well, we’re not in Kansas anymore…