According to the FT research by buy-to-let lender Kent Reliance has shown that the value of landlords’ property assets rose by £156bn in the past 12 months to £1.2tn. Rents rose to £53 billion a year. And new tax measures are being circumvented by buying properties in companies - which always looked to be a gaping loophole (deliberately created?) in George Osborne's supposed crack down on buy-to-let, which is likely to prove worthless as a result.
I have, as usual, a range of concerns. First, let's remember that income from buy-to-let is much more lowly taxed than is income from going out to work. The difference is, of course, national insurance, plus the ability to offset expenses that the individual householder, in a similar situation, does not have. The effective tax differential between buy-to-let and earned income might easily exceed 20%. It is absolutely impossible to say that the UK is a country where people who go out to work are fairly treated by the tax system when it includes such inequality.
Second, before anyone points out that not all buy-to-let rental income is taxable because there are costs to offset, let me make it clear that by far the largest part of those costs are mortgage interest, and that, course, does eventually give rise to liability to tax on interest earned, where the same differential arises.
Third, my research has shown that it is very unlikely that all the gains arising to buy-to-let landlords are taxed.
There are three real policy responses required. First, it is necessary to reinstate an investment income surcharge in UK taxation. We had one of these until the mid-1980s: income from what might be considered unearned sources (rents, interest, dividends, etc.) was subject to an additional 15% tax rate. This was justified on purely social grounds: there was meant to be a bias to work (and why not?). It does, however, have a purely pragmatic basis as well: horizontal equity in the tax system requires that tax be paid at approximately equal rates from what ever source it arises. This does not happen in the UK, and we have a deeply inequitable tax system as a result. This must be addressed.
Second, it is absurd that capital gains are taxed at a lower rate than income: again, the alignment of rates is essential. Nothing less will do, and at one time the Conservative Chancellor (Nigel Lawson) had the courage to do this.
Finally, of course, HMRC need the resources to trace all this taxable income, and the resulting gains. But, over the next few years every single local office in HMRC will be shut. How is that going to help this process?