As the political turmoil created by the shenanigans of the political parties comes to a head this week in the Republic of Ireland. The social aspect of the new financial measures delivered by a party that seems to be imploding is being felt all around the country. Few people have come off worse than the small-time residential landlord.
The swathing cuts in the emergency budget has left a small group of buy-to-let investors, the sort of people who own one rental property to provide a pension, wondering whether they will have enough money left to pay their landlord insurance never mind their mortgages. The December emergency budget decreed that all property- based legacy tax relief was to be gradually eroded.
It came as a bitter blow to many landlords in Ireland and the fact that it is now being put back to 2012 is only a temporary relief. The Property Owners Association (POA) belief the new measures will see many of their members become bankrupt within years of the introduction of the scheme. They believe the Irish Government is hoping the people of the country still hold the concept of a landlord as some kind of manipulating bully who deserves all the misfortune he gets. They point out that big developers and multi property owning landlords will not even suffer.
Why is it so bad for 1 and 2 property landlords?
One member of the POA explained that the controversy surrounded section 23, which relates to rented homes in tax-designated areas. They stated “The main attraction of this type of property for investors was the ability to offset over three quarters of the purchase price against all of their Irish rental income, thereby cutting their tax bill.
“The budget proposal now means relief can only be offset against rental income from a Section 23 property, as opposed to rental income from the investor’s entire Irish portfolio.”
As the rents on Section 23 properties tend to be low, and borrowings high, little or no taxable income arises on such properties. If the tax relief becomes ring-fenced in this way, then it won’t apply to the small-time investor.”