Fears extra tax will put buy-to-let investors into arrears
Published 01/12/2012 | 05:00
MOVES in the Budget to impose extra tax on rental income will push more buy-to-let investors into arrears, tax experts said.
Already, one-third of investors are either in arrears or have had to plead with their bank to make lower payments.
In last year's Budget, Finance Minister Michael Noonan said he planned this year to impose pay-related social insurance (PRSI) on rents, interest income and dividends from shares.
PRSI is imposed at 4pc.
But experts at Taxback.ie said putting PRSI on rental income from investor properties would result in a surge in jingle mail – where people throw the keys into the letterbox and let the bank take ownership of it.
Christine Keily of Taxback said there would be a rise in buy-to-let arrears. This meant that the banks, and ultimately the taxpayer, would end up paying for the PRSI hike.
Close to 50,000 of the 150,000 investor mortgages are either in arrears or the mortgage holder has had to make arrangements to reduce payments.
Ms Keily said: "With very few property investments paying for themselves, where the income is greater that the expenditure, these new taxes will simply widen the monthly cash gap."
Earlier this week, this newspaper reported that Bank of Ireland and ICS are to take trackers off buy-to-let investors whose interest-only period has ended, or who seek a deal to reduce their repayments.
The bank has €7bn worth of buy-to-let mortgages, with chief executive Richie Boucher warning recently that €3bn of this was "problematic".