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 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?