Buy-to-let tax break could hurt FTBs

A proposed tax incentive for buy-to-let landlords could freeze more first-time buyers out of the market.

According to lobby group PricedOut, buy-to-let investors already have an unfair advantage when it comes to property purchase, which could be exacerbated if the planned tax breaks are introduced.

A consultation paper published by the Treasury last month proposed to allow professional investors to pay Stamp Duty separately on each individual home they buy, even when they buy a large portfolio of properties. As Stamp Duty is tiered according to the cost of a property, this could reduce their overall tax bill.

For example, at present, if an investor buys five properties at £150,000 each, they would be charged 3% tax on the total cost of £750,000 - £22,500. Under the new proposals, they would pay just 1% tax on each property - £7,500.

The boom in the buy-to-let sector in the past decade, which has resulted in 10% of all mortgages being accounted for by landlord borrowing, was widely blamed for inflating property prices and creating a shortage of first-time buyer properties, as these are the type of homes often bought by property investors.

PricedOut, which campaigns on behalf of those first-time buyers who cannot afford to get on the property ladder, says the proposal is grossly unfair to first-time buyers.

William Griffith, spokesman for PricedOut, said: “The large tax breaks that buy-to-let currently enjoys mean that they can always outbid first-time buyers. It is astonishing that the government is seeking to further entrench this disparity in the housing market. High house prices and buy-to-let speculation have been behind a large growth in wealth inequality and have caused increased financial instability.”

PricedOut believes that high house prices have frozen 1.2m prospective first-time buyers out of the market and led to about 1.4m fewer first-time buyer mortgages since 1999. It calculates that, in the last six years, 647,300 homes have been bought by buy-to-let investors which otherwise might have gone to first-time buyers.

Griffith added: “The public face several years of higher taxes and spending cuts – it is frankly baffling that the government is trying to give further tax breaks to a sector that helped get us into our current economic mess.

“Unless we want future home ownership to be a preserve of the wealthy few, we need the government to tax property speculators more, not less. Removing buy-to-let tax breaks would be a very popular and practical way for the chancellor to start addressing the deficit.”