Government urged again to rethink approach to property taxation ahead of Budget
Speculation over possible tax increases targeting the private rented sector has drawn criticism from a leading economist, who warned that such measures could have negative economic consequences.
Paul Johnson (pictured top), provost at The Queen’s College and former director of the Institute for Fiscal Studies, shared his views on the National Residential Landlords Association’s (NRLA) “Listen up Landlords” podcast. In conversation with NRLA chief executive Ben Beadle and co-host Richard Blanco, Johnson expressed concern about the rationale behind current tax policy affecting rental housing.
“I think you need to think very carefully about how to tax housing and how to tax rental housing, and the first myth to bust is the idea… that somehow landlords are under-taxed relative to owner-occupiers, which is complete nonsense,” Johnson said.
“If you make it more expensive to be a landlord, then there will be some combination of fewer landlords and higher rent.”
Johnson urged the government and Chancellor Rachel Reeves to establish a clear, long-term framework for property taxation, emphasising the need for consistency over time. He argued that frequent changes to tax policy, often made to address short-term budgetary pressures, create uncertainty for investors and the sector as a whole.
He also advocated for the abolition of stamp duty, describing it as “the worst tax we have,” and suggested that, if given the opportunity, he would remove it entirely.
Johnson further stated there is a “strong case” for aligning capital gains tax (CGT) rates with those of income tax, but cautioned against taxing gains that merely reflect inflation. He proposed a tax-free allowance for returns up to the rate of inflation plus 2% or 3%, with CGT applied only to gains above that threshold.
The government, Beadle suggested, would do well to consider the economist’s recommendations. “Too often, the way rental property is taxed is based on nothing more than topping up the coffers from one year to the next,” he said. “Such knee jerk and short-term thinking is no way to run an economy.
“What is needed is a consistent tax strategy that gives responsible landlords the confidence to invest in the decent long-term homes for rent that so many people desperately need.”
The property sector has repeatedly called on the chancellor not to alter housing market policy, with the Intermediary Mortgage Lenders Association warning that tax hikes on housing would yield little fiscal benefit and risk slowing economic recovery. Homeowners have also raised concerns about changes to stamp duty and extending capital gains tax to main residences, fearing these could damage market confidence. The National Institute of Economic and Social Research has advised prioritising income tax rises over wealth or corporate taxes to avoid further economic distortions.
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