Our cover story a few weeks ago was on the matter of buy-to-let. I also wrote about it here: Is this the end for but-to-let?
Our argument is that new rules limiting tax relief on buy-to-let mortgage interest to a 20% tax credit regardless of the marginal rate of the borrower would change the maths for a huge number of investors.
It's a story that more and more people are beginning to understand. The Times wrote about it this weekend, noting as we have that "all higher-rate taxpayers will pay substantially more in tax, with some forced to pay more than they make in profits, making their investments unviable".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The end of the ability to offset cost against tax might also move landlords who are currently lower-rate tax payers into the higher-rate band (or higher to highest). That's something, says tax expert Tina Riches in The Times, that would restrict their personal allowances and access to child benefit.
This is upsetting a lot of people 26,000 have already signed a petition to have the tax relief reinstated. But we doubt that's going to happen. Instead of getting easier, the environment for buy-to-let investors is likely to get a lot tougher.
It's all about Jeremy Corbyn and something he and George Osborne might turn out to have in common. As Brian Dennehy of Fundexpert.co.uk points out, while Jeremy Corbyn is unlikely to ever be prime minister, he will change the focus of our political debate: "all parties are now going to have to start debating social justice" properly whether they want to or not. And the UK's many housing have-nots are going to want to shift that conversation firmly towards the provision of affordable housing.
The buy-to-let sector has been pumped up by low interest rates, and by QE slamming down yields on other asset classes. Also, by a looser regulatory environment for investors than owner occupiers. And, of course, by the many tax breaks on offer to buy-to-let owners. Corbyn is likely to "focus on these distortions and the cost to society" when he discusses housing.
In that kind of environment, how likely is it that the chancellor will give into political pressure to drop his tax changes? We'd say very unlikely.
Worse (for investors at least) it might give Osborne the political cover/excuse he needs to cut the relief further. He knows rents are too high and house prices are inflated, and, given his actions so far, it seems clear that he wants to call an end to the great buy-to-let boom. Corbyn looks likely to be able to help him do just that.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrencyAccording to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
-
Investing for children this Christmas – five ideasIt might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
