Taking care of the “social” in housing.


Paying for the improvements in our social housing, to improve safety is going to be expensive. You wonder where the money will come from, or at least I did till I read a good article by Merryn Somerset-Webb in the FT.

In it, Merryn argues that the net is tightening on Britain’s private landlords, many of whom are not registered for tax with HMRC.

Buy-to-let evasion could be costing the Treasury £150m, but HMRC is fighting back

She takes an example …..

For a hint of what this means in practice, look to Newham. The London borough runs a property licensing scheme and has 27,000 registered landlords on its lists.

But when it gave HMRC the names of those landlords for some simple analysis it was found that almost half (13,000) are not registered for self-assessment. This doesn’t necessarily mean all of them are not paying tax on their rents. Small amounts due can be collected via PAYE and some properties will be owned by companies or trusts and separately accounted for.

But even if you make allowances for this and assume that, say, 10,000 rather than 13,000 landlords are not properly declaring rent, there is clearly something of a problem here. Use the average rent in the area (just over £16,000 a year) and £166m of gross rent is not being declared.

Assume a 10 per cent profit margin and an average tax rate of 30 per cent (some will be 20 per cent payers and some 40 per cent) and HMRC is down £4.8m in revenues in one London borough alone.

I am sure many of us are implicitly making the link between the tax that isn’t being paid by private landlords and the lack of proper funding for the maintenance of our public housing stock.

The FT article goes on to talk about various initiatives at HMRC, including better surveillance, tougher penalties for those found out and ensuring that those licensed to rent a house , are registered with HMRC. (Those of us familiar with pensions will hope that those licensed by HMRC to operate a pension will soon be registered with a toothsome regulator)!

Merryn concludes that of her column is asking the question “how should the private investor best conduct himself” and concludes

Given the potential downside of being a ghost or a moonlighter, these days a large part of the answer has to be “honestly”.

The lure of property rental

I have a great deal of time for David Hargreaves who argues that direct  property investment is the way for individuals to cut out the middlemen and directly link the investment of their savings to the real economy.

david hargreaves.png

David Hargreaves in action


He’s on record on this blog and at various pension play pen lunches arguing that the best self-invested pension is the rental stream ordinary people can get by owning buy-to-let properties.

David is not just a bright guy, but he’s an honest one and I’m sure he isn’t thinking that the way to get rich quick is to avoid paying HMRC what they’re due.

There are over a million private landlords who agree with David and are relying on private rental income,

Of course there are risks, especially where the money invested is borrowed, but it is hard to argue that for those prepared to be properly organised – and go about this business properly – being a private landlord can be a very good way of replacing income as you grow older.

Taking care of the “social” in housing

Merryn stopped short of making an explicit link between the social aspects of the housing market (“social housing” for short) and the entrepreneurial impulse that leads to us becoming private landlords. Whether it is through Airbnb or as a Robbie Fowler style private property mogul, we have responsibilities to our tenants, the local community and indeed to the tax-payer.

We are keen to lambast local authorities like Kensington and Chelsea for not doing their job and turning a blind eye to the safety of their most vulnerable citizens. Perhaps we should be taking care that we the private landlords we are, know or are surrounded by, are raising their game too?

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Taking care of the “social” in housing.

  1. Adrian Boulding says:

    Earlier this month a buy to let landlord was jailed for 27 months for failing to declare his property sales, by which he evaded £157k of capital gains tax. And HMRC are now asking the Courts for a seizure order so they can get their money by forcibly selling some of his remaining properties. It’s a stark reminder that if you use buy to let as an investment then you are responsible for all the tax matters. Quite different from a GIA with a decent platform where the “middleman” will neatly package up all the information you need for your tax return and send it to you at the end of the year. And if you invest through an IFA too then they can even fill your tax form in for you, if you purchase that service from them. Adrian

  2. henry tapper says:

    Fair points – I still struggle with the self invested bit of a self invested personal pension when an IFA’s doing all the work! But I’ll shut up before John Mather hits me over the head!

  3. John Mather says:

    I mentioned at one of the lunches that in search for yield I had decided to make a five covered bond of £50M the first tranche of £10m available with a gross yield of 4.8% Because of the need for a regulated person there is 0.3% of costs so a net 4.5% should be the result no fee to me as an IFA

    It has taken a while and no small expense. So why is this relevant to this article ?

    The first project of 161 dwellings has 42% social housing content pre sold to housing associations which will do something positive for the local housing supply and allow my builder client to go from 50 houses a year to 600 a year over the next three years

    Initially designed as an ISA product it occurs to me that it might be suitable for pension funds indeed what has surprised me is how many have been looking at where to park cash from taking profits on gilts and shares in what feels like a very bubble like market

    If interested do let me know always willing to listen to constructive criticism

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