Proposed tax breaks for landlords needed to keep them in the market

Proposed tax breaks for landlords needed to keep them in the market

Between the passing of Martin McGuinness, the latest Garda penalty point controversy and the build-up to tonight’s big match at the Aviva Stadium, one news item that might have got glossed over this week is proposed government plans to assist landlords.

A series of tax breaks are reportedly in the pipeline for “accidental landlords” in a bid to keep properties in the rental market and boost supply.

DNG chief executive Keith Lowe

This couldn’t come at a more important time. Last week Keith Lowe, chief executive of estate agency DNG, told a Housing Agency event that 20% of all properties on his company’s books across their 78 branches was buy-to-let properties that were put up for sale.

This figure was even greater in Dublin at 27% with the numbers suggesting that landlords are looking to get out of the market.

At a time when rental properties are hard to come by across the country that is not ideal but there is an acknowledgement that changes to the system are required.

While rents are at an all-time high right now, issues such as the level of tax that landlords must pay means that many no longer see it as worthwhile.

In order to combat this the Department of Finance has set out a range of possible tax reliefs aimed at encouraged landlords to remain in or to enter the rental market.

Among the options to be considered to alleviate the rent crisis is a reduced tax rate on rental income for individuals, or tax reliefs to be targeted at “accidental landlords”.

The public consultation document on the tax treatment of residential landlords also raises the prospect of the property tax liability being transferred from landlords to tenants.

It follows concerns that residential landlords were not treated in a similar fashion to commercial landlords, and that this could discourage some from entering or remaining in the market.

While various bodies have looked to cash in on the current trend of rising prices in the rental market, almost seven out of 10 landlords own just one property while 91% have three or less.

Large, professional landlords such as real estate investment trusts, corporate vehicles and investment funds, account for just over 2pc of tenancies.

While income earned by individuals from the letting of property is liable for income tax under self-assessment, rental income earned by companies is subject to a lower rate of corporation tax.

Also mooted is additional tax relief for expenses including restoration of 100pc relief on mortgage interest, deduction for the time allocated to managing a property, and deduction of the Local Property Tax.

VAT relief for construction of rental accommodation and the introduction of “penalty taxes” for vacant property or development land could also be introduced.

So far these matters are only being discussed but a working group has been established made up of officials from the Department of Housing and the Department of Finance, Residential Tenancies Board (RTB) and Revenue Commissioners with the closing date for submissions April 7th next.

The Government will examine if new tax reliefs or other measures are required to incentivise landlords to remain in, or enter, the rental market.

No decisions will be made until after the consultation is included, and EU state aid rules will have to be taken into account if any new measures are proposed.

The working group will report back in the summer with a view to proposals being announced in October’s Budget.

Let us know your thoughts on the new proposals:

  • Do you think more should be done to incentivise landlords to make properties available?
  • Have you been put off entering the rental market as a landlord because of matters such as tax etc?
  • What changes would you recommend?

Have your say below…

There are 16 comments for this article
  1. John at 9:39 am

    Hi, I have one apartment which I bought in 2004. I lived in it for 8 years and now rent it out. It is still 20% below what I paid for it but it costs so much to keep and I pay so much tax I have just put it on the Market. Getting out now .. don’t believe any tax changes can convince me to stay in this .. John

  2. Sam at 7:34 am

    I have a house and my husband has a house which we both had before we met each other. He moved into my house and rented his out. The rental income barely covers the mortgage but then he gets screwed in tax on the rental income. He isn’t charging over the odds on the rent and hasn’t increased the rent in over 4 years as he isn’t greedy like most rental investment properties. It would be nice to get some sort of a tax break as the revenue class the rent received as an income but it’s not.

  3. CC at 11:21 pm

    The bottom line is why would a hardworking, tax-paying Irish citizen (with a family to support) want to invest in a buy-to-let OR why would an ‘accidental landlord’ not choose to sell his/her property? What is in it for the small landlord? In my opinion, nothing but hassle, stress and more tax due at the end of the year than you can comprehend. The government needs to stop giving to those doing all the taking and think about those trying to make ends meet and not knowing what to do – dealing with tenants that won’t pay, trying to pay two mortgages (a primary residence as well as a buy-to-let property where a tenant might not be paying on time), etc. Another thing that should be made MANDATORY is SW and Rent Allowance tenants should have payments made directly to the landlord. I know first hand how this is withheld at times when tenants have other bills or things to purchase and we were left waiting. Absolute horror.

  4. Jac at 10:59 pm

    I wonder why landlord representatives are not invited to the commission. Who knows and understand the situation better than them?
    Nothing, can prevent landlords exiting the market until they are treated like a business and not like a demon or second class citizens.

  5. Pat at 10:00 pm

    Can a landlord get his house back ? That’s the fundamental issue. Tax relief is part of the equation only. Coveney has abused landlords. He’s used them to meet the failure of social housing.

  6. John at 5:17 pm

    I’m a landlord and I’d love some more tax relief, but I’m not sure I see the point. The houses won’t disappear or sit empty if they’re taken off the market, not with the housing crisis we have. Or to put it another way I don’t see how this measure would create a single extra house. Maybe some penalties for the guys we hear are sitting on those land-banks in order to get them released for building might help.

  7. Mike at 4:51 pm

    How many poorly thought out ideas can the Department of Finance come up with before politicians stop listening to them? At this stage every body that has any residential property rented considers themselves an accidental landlord, so what criteria are they going to use? Why even try to single out one sub-set of the market for favourable treatment in this way. Its would still be unattractive for the majority of private landlords to stay in the market. Given the level of housing demand that exists the goal should be to keep everyone in the market until the government / local authorities finally gets the finger out and delivers some housing units. After all they have only been talking about building houses for three years at this stage.The focus should be on addressing the massive tax disadvantage that all private Irish tax payers face when investing in property by comparison to non-domiciled investors or large funds. What does it say about our politicians and senior civil servants that they will roll out the red carpet and the harp for foreign investors but will happily stick it to their own citizens at every turn?

  8. Kieran Donagher at 4:22 pm

    The PTRB is only a pure money racket anyway..no assistance for landlords whatsoever.

    • B Murphy at 3:41 pm

      absolutely agree – packed with useless politically appointed/connected knobs who invariably take the side of the non rent paying chancer.

      I have a couple of apts bought for my pension, rents 25% below market but the North Korean style Junta in power will not allow me to rent my own property at market rates. Simultaneously the Stateowned/taxpayer bailed out lender will not cut me any slack so I want to sell and get the hell out of this lossmaking stress inducing business. But no, not allowed to get the tenants out without another snooping branch of the Junta wanting to examine my affairs, my reason for selling blah blah etc. How anyone remains in the Buy to Let sector is an absolute mystery and for anyone thinking of entering it, stay well away. Your money is safer and better invested under your mattress.

  9. Dee at 4:21 pm

    I’m an accidental landlord. Rental income does not cover mortgage (believe it or not). After allowable deductions last year, paid 49.5% of the remaining rental “income” in tax/PRSI/USC, even though I have to supplement the rent every month to keep the mortgage paid on the property. Have to pay this tax etc.out of my own income as I don’t profit from the rental income in any way. (full mortgage repayments aren’t taken into account as an allowable expense for business purposes; only 80% of the interest). I realise that if I had no mortgage on the property it would make a profit, but don’t think I can hold onto it for that long as it costs me thousands a year in tax that I can’t fund from the rental income. Can’t sell as I would be at a massive personal loss and owe the bank @60k.
    That said, I have great tenants. I haven’t increased their rent since they moved in as they are paying fair rent and look after the place. It bugs me to see places being rented that are not fit for living in and at extremely high rents. But I personally would exit the rental market in a second if I could as it is a massive financial strain keeping up with the revenue payments every year.
    I would propose that 100% of the mortgage interest and the LPT are allowable expenses. The tax rate should be reduced. Paying 49.5% of anything to revenue in tax/PRSI/USC is crazy. Tiered taxed rates based on total cost of business could be worth considering, e.g. lower tax rates upon entering the rental market which allows some breathing room for those with higher mortgage payments. Lower tax rates for those who don’t increase rent within “x” number of years could also be considered; good for landlord, good for tenant. Incentives to minimise the cost of maintaining the property would also help and could result in quicker resolution of issues by the landlord (subsidized safety equipment, insurance discounts, repair service discounts etc.)

  10. Peter Grant at 3:49 pm

    100pc relief on mortgage interest is of little benefit since most since interest is often a small part of investment cost.

    The stamp duty paid to government on the purchase of a premises needs to be deductible from income since its usually repaid as part of the mortgage.

    Management is considerable cost for landlord’s and has never been recognized especially when tenant’s present with coping issues.

    At present a Landlord with one rented property can become ineligible for student grants even on modest P.A.Y.E income, due to the current treatment of rental income.

    The net position is that most one off landlord’s provide a service to the State at a cost to themselves. The reason Landlord’s are leaving the business is therefore obvious.

  11. Deirdre at 3:49 pm

    The RTB need to have more power. Landlords get a decision in their favour but the tenant just refuses to comply and the landlord’s only option is the courts that they have to finance – crazy. Tax definitely needs to be looked at. Only reason I’m still a landlord is because property is in negative equity and I don’t recommend to anyone I know to become one. All the power is in the tenants hand. My last two tenants refused to pay their last month’s rent and told me to use the deposit….but that leaves me with no bargaining tool to ensure the property is left in an acceptable condition but there’s nothing I can do!

  12. Brenda at 3:19 pm

    It’s about time! Why are there so many empty properties? Because it’s too much hassle for the owner to rent them out as the tax is so high plus everything else that goes with renting a property. If there was a tax free amount you could earn before paying tax (same as renting out a room in your home) there would be a lot more houses on the rental market. Plus the capital gains tax when selling a second property is much too high. A lot of second properties are not owned by wealthy people and the government needs to realise this!

    • CC at 6:54 pm

      I totally agree with you Brenda. There should be a tax free amount you can earn before paying tax (similar to the rent a room in your home scheme). Also – why for those of us with just one property do we now have to be classified as self-employed for Revenue? My husband and I are both PAYE workers with two young kids who naively entered the buy-to-let market in 2002 (when we had a bit of money and some forward thinking for retirement). You are so right – it’s a lot of hassle for no return at all – we’re looking at a tax bill of over €2k this year (for 2016). We’re renting a 3 bed house for €825 in a town where rents for similar houses are now reaching €1k or more. Tax breaks are definitely needed as we’re not earning a penny profit on this house as the rent paid just about pays the mortgage, insurance, property tax, etc. – we have to add in €10 or 15 per month (I know we’re very lucky in that it’s minimal) but there is nothing left for repairs, replacing appliances when needed, etc.

      • Jac at 12:41 am

        Well articulated: “The government needs to stop giving to those doing all the taking and think about those trying to make ends meet and not knowing what to do”

    • Joe Duane at 3:37 am

      It costs too much to bring an old property up to the standard required with all the new regulations ,so many living accommodations over shops are idle. It probably seemed a good idea at the time to make all rental accommodations pristine but there is a huge cost involved. I know this having spent a fortune on one.
      If the total cost of bringing a property to the high standard required was allowed as it was under the section 23 for new properties. I think the housing crisis in the cities would be solved overnight and create a lot of employment. The fact that much of this over -shop accommodation is owned by Irish people it would put money into the economy rather than in the hands of the “Accidental Landlords” of foreign origin where the profits, at a low tax ,are repatriated abroad.
      By the same token new properties are specified out of reach cost -wise, and anyway they are not inspected so they can be fire-traps or have pyrite problems or otherwise be badly built. They only look up to standard. So we have a perfect storm.
      The “accidental landlords” by logic couldn’t help themselves and fell into this state through no fault of their own, should perhaps be given a break to help them help the housing situation. So “accidental landlords” will be the heroes of the hour, the answer to our prayers once the Government gets behind them. This reclassification of some if not the majority of landlords in the country will mollify the socialists among the administrative and ruling classes and advance our social cohesion.

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