Define “Tax Break”

Landlords enjoyed a record £14bn in tax breaks in 2013, according to figures revealing the expansion of the UK’s buy-to-let market in the aftermath of the financial crisis.

So, how are we going to define tax break here?

Possibly by taxing someone on the profits their business made, not their turnover?

Property owners, who can claim tax deductions for a wide range of expenses when they rent out homes, claimed £6.3bn in tax relief against the cost of mortgage interest alone in the 2012-13 financial year. The scale of the tax breaks was revealed by HM Revenue & Customs after a freedom of information request.

Yes, yes, that is how we’re going to do it.

Fuckwits.

15 comments on “Define “Tax Break”

  1. It’s the progressive press, it no longer matters if it’s accurate. All that’s needed is a snappy headline to bait its army of ‘readers’…

  2. Oh – the Stupid it burns
    So, if we make it more expensive to own and let property, what do our Social Justice Warriors think will happen to the cost of rental property? To be honest, I am not particularly familiar with the UK housing market – but I imagine, especially since there has been a (shocking) 30% increase in the number of landlords over five years (not six, but maths is not a graun strong point, now is it?) that we have a competitive market, so renters are paying the marginal cost of providing their accommodation. The clever student might note that they are paying the post-tax cost with pre-tax quid: if the post-tax cost goes up by denying tax deductions for expenses?… well, let’s leave that for the pendants.

  3. I don’t think it’s as simple as that. If I borrow to buy an investment property, I get tax relief on the interest. If I borrow to buy shares in British Land Plc, I don’t get tax relief on the interest. The tax legislation treats direct investment in property as a business, but there seems little logic behind the distinction.

  4. British Land gets interest relief. Buy a house through a Ltd instead of directly, the Ltd gets interest tax relief, you do not on the capital you’ve borrowed to put into the Ltd. The tax treatment is exactly the same. The BTL landlord is simply running the business as a sole proprietor, not a Ltd or PLC.

  5. Its obvious, reading the article comments, what The Groan and its readers mean by ‘tax break’.

    All money belongs to The State. If you get to keep any of the money you earn, its a tax break.

  6. The article also says that MIRAS was introduced in 1983, but it was introduced in 1969 by Roy Jenkins and the amount of eligible mortgage increased in 1983.

  7. Tax relief for BTL mortgage holders are worth it for the entertainment & instructive values alone.
    The wailing & screaming following the inevitable collapse of the property bubble as BTL’s, strung out on the end of a borrowing lever, find their entire wealth evaporate overnight is going to be hilarious.

  8. If I borrow to buy an investment property, I get tax relief on the interest. If I borrow to buy shares in British Land Plc, I don’t get tax relief on the interest.

    You would if you were doing it as a business.

    The article also says that MIRAS was introduced in 1983

    There is nothing wrong in British society, for a certain bunch of “useful idiots”, that doesn’t have its root cause in the actions of St Maggie. Despite all the evidence. As exemplar: coal mine closures.

  9. The simple solution is to tax journalists on their gross expenses.

    Let’s see, that air fare was £200. Here’s our cheque, less tax, as the fact that you had to get an airplane to get that story is not tax deductible. Therefore the cheque is for £130 and we have paid the £70 to Richard Murphy…

  10. well I’m split on this one. half of me is outraged at the stupidity of people who seem to think that if mortgages were no longer allowable costs when computing taxable profits then we’d simply get all these billions as tax (instead, all that would happen is that landlords with debt-financed properties would have to exit, and we’d get some sort of new equilibrium in the housing market – not sure what it would look like)

    otoh hand it’s not just lefties that worry about the tax treatment of debt. here’s the pinkos at the IMF
    https://www.imf.org/external/pubs/ft/sdn/2011/sdn1111.pdf

    in a rising housing market, the current rules do allow those with enough money to get into BTL to make shed loads of money very quickly. Maybe answer is land value tax or something. I don’t know.

  11. “in a rising housing market”: but there is no way of knowing whether a market is rising; all you know is that it has been rising.

  12. Pingback: UK households enjoy £125bn “tax break”! | uneconomical

  13. Businesses aquiring domestic property do enjoy and advantage over owner – occupiers thanks to interest relief. So there is a fairness argument around denying interest deductions on domestic dwellings.

    It is also the case that, to some degree anyway, this deduction works it’s way through to property prices. I guess the argument is based on the idea of the taxpayer subsidising home owners.

  14. @ Ironman
    Actually that is a canard propagated by the Labour Party.
    Rental Income R, Mortgage interest I, maintenance expenses M
    R>I+M or the landlord goes bust.
    The owner-occupier pays I and M out of after-tax income but pays no tax on R (which the tenant pays out of after-tax income). The tax relief on R is worth more than the lack of it on I+M.
    The landlord pays tax on R-I-M
    [And that is ignoring the lower cost of M if the owner-occupier does his own minor repairs].
    The only time when the tax system favours the landlord is if R agregate I+M.
    QED

  15. Pingback: TheMoneyIllusion » When did the left jump the shark?

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