Being A landlord is not a business

MyOnlyPost

I have read in several threads from several posters the notion that landlords run a business. This is simply not true. Landlords buy a house as an investment and rent is a return on that investment, no different to returns on stocks or shares or interest from a bank. Crucially HMRC do not categorise rent as income from work, but as income from capital investment.

Similarily the governments recent changes to a landlords ability to claim mortgage interest relief against his income signifies that the government doesn't classify private landlords as a business as ALL business in the UK are entitled to offset 100% of their borrowing costs against their turnover for the calculation of tax, where landlords soon won't be able to. It is possible when the changes take effect that a couple who are higher rate taxpayers and bought a house for a child as an investment, who rent it out to cover the mortgage will pay MORE tax even if they make a loss on renting out as they are taxed at 40% on the turnover but only get 20% tax relief on their "business" debt. What other business pays tax on a loss? Significantly this change does not affect corporate landlords, effectively giving large industry a massive advantage over smaller enterprises

I know there are lots of landlord bashers out there because it is one of the current hot topics. We have all heard about, read about or seen on TV bad landlords or slumlords, but these people are a small percentage of all landlords, most of whom are decent and honest and want to provide decent housing because ultimately we all want tenants to stay put. Equally there is a small minority of tenants who fail to pay their rent, wilfully damage property or steal from their landlords houses. It would not be fair if landlords judged all tenants by the standards of the minority so equally people shouldn't bash/hate landlords based on the actions of a small minority

kinger101

You're entitled to your own opinion. You're not entitled to your own facts.

http://www.rossmartin.co.uk/sme-tax-news/35-sme-tax-news/1091-letting-qualifies-as-business

agrinnall

There is absolutely no question that being a LL is a business, and anyone suggesting otherwise is naive or foolish (take your pick which applies to you).

Most people on here are not LL bashers, but we are bad LL bashers, just as we are bad tenant bashers.

booksurr

Oh dear, what point are you trying to make?

HMRC do regard letting residential property as a "business"
"Rental business - what is it?
Profits from UK land or property are treated, for tax purposes, as arising from a business." https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1020

Whilst I agree with you in very broad principle it is closer to investment activity than "true" trading activity, and that the tax rules are applied in a deliberate way to deny the taxpayer the opportunities granted to a trading activity, the fact remains that any competent and decent LL must, by definition, operate as a business.

landlords have a customer whose needs must be met and whose problems must be responded to. That is a long way removed from simply investing.

steampowered

Dictionary.com defines a business as follows:

1. an occupation, profession, or trade.
2. the purchase and sale of goods in an attempt to make a profit.
3. a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern.

Being a landlord very clearly meets the second and third limbs of that definition.

Being a landlord is totally different from buying stocks and shares. You can't just buy a house and forget about it. You have a legal responsibility to maintain the state of the property.

The points you are making on tax suggest that you do not understand the difference between a "business" and a "company". These are completely different concepts. A sole trader conducting a business is not able to offset borrowing against profit in the same way that a company can.

kinger101

agrinnall wrote: »

There is absolutely no question that being a LL is a business, and anyone suggesting otherwise is naive or foolish (take your pick which applies to you).

Most people on here are not LL bashers, but we are bad LL bashers, just as we are bad tenant bashers.

Indeed - holding of investments can be a business in itself. It would not be questioned for a company, as it's written into the Corporation Tax Act.

anselld

It is a Business, but not a trading business.

star02

If they classed it as a trade for individuals then there would be class 2/4 National Insurance too!

Yes they will be restricting interest relief to 20% (being phased in over a few years) but that, I believe, is to make it less attractive for those able to be landlords just because they can raise finance to purchase a property.

Having said that, an Indivudal can purchase a property via a limited company and have the rental income taxed at the same rate as the mortgage relief but then thought needs to be considered for the additional income tax due when paid on dividends drawn from company (after first 5k) and additional admin.

leslieknope

of course it's a business as others have pointed out. landlords don't have to buy and let properties, they could leave those properties for other buyers and invest their money elsewhere. you do it to make a profit, not out of the goodness of your hearts.

ANDR£W

I have nothing against anyone buying property,But I do not agree that LL,s should recieve any financial reward from the tax payers purse! when there are other more needy causes,I.E abolish Stamp Duty for young first time buyers and building more social housing for families that cannot ever afford to buy but get financial help via Housing benefit to pay ridiculous rents too unscrupulous Rigsbyesque landlords.Does the fact that you believe you're running a Business instead of being a LL help you sleep easier?

Cakeguts

ANDR£W wrote: »

I have nothing against anyone buying property,But I do not agree that LL,s should recieve any financial reward from the tax payers purse! when there are other more needy causes,I.E abolish Stamp Duty for young first time buyers and building more social housing for families that cannot ever afford to buy but get financial help via Housing benefit to pay ridiculous rents too unscrupulous Rigsbyesque landlords.Does the fact that you believe you're running a Business instead of being a LL help you sleep easier?

This means that private landlords should not let to tenants receiving any type of benefit so also including pensioners. So where do you suggest that they all live?