Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Simon Dewsberry" at "09/07/2015 - 01:14":

Interesting comment Simon!

For those who are not following this subject matter, further reading at:
http://www.primelocation.com/discover/mortgages-and-finance/guide-to-sharia-law-mortgages/#uUabFLySgbvb4byE.97
and
http://www.theguardian.com/money/2008/jun/29/mortgages.islam

My initial thoughts were there won't be a Sharia-compliant BTL product - but I stumbled upon this: http://www.islamicmortgages.co.uk/index.php?id=320

Looks like the Chancellor may not have thought through all of this - hence the plan to implement from tax year 2017-18 onwards...

Reply to the comment left by "Mervin SX" at "09/07/2015 - 01:27":

he may well have thought it through though !

taken from https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015

The ability to deduct these costs puts investing in a rental property at an advantage. Tax relief for finance costs is particularly beneficial for wealthier landlords with larger incomes, as every £1 of finance cost they incur allows them to pay 40p or 45p less tax. The Bank of England has also noted in its recent Financial Stability Report that the rapid growth of buy to let mortgages could pose a risk to the UK’s financial stability61.

The government will restrict the relief on finance costs that landlords of residential property can get to the basic rate of income tax. The restriction will be phased in over 4 years, starting from April 2017. This will reduce the distorting effect the tax treatment of property has on investment and mean individual landlords are not treated differently based on the rate of income tax that they pay. It will also shift the balance between landlords and homeowners.

....not "interest" but "finance costs" which may well be all encompassing

Reply to the comment left by "Simon Dewsberry" at "09/07/2015 - 02:03":

taken from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443277/6041_Restricting_finance_cost_relief_for_individual_landlords__3_.pdf

"General description of the measure
This measure will restrict relief for finance costs on residential properties to
the basic rate of income tax. This will be introduced gradually from 6 April 2017.
Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan
.
Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a
basic rate reductionfrom their income tax liability for theirfinance costs."

...as usual the devil is in the detail so still unclear if rent is 100% allowable or considered a "finance cost" , but very nice of the to add this ! :

"If you have any questions about this change, please contact Megan Shaw on
03000 585628 (email: megan.shaw@hmrc.gsi.gov.uk)."

Reply to the comment left by "Mervin SX" at "09/07/2015 - 00:30":

Mervin I am with you right up to this point where you calculate the property profit and then show the tax to be paid. What I don't understand is when you talk about deducting the 40% and then in the second example the 20%. Sorry for being so dim but I am.struggling to get my head around this.

Reply to the comment left by "Gary Nock" at "08/07/2015 - 15:27":

It's called THEFT!

Reply to the comment left by "Simon Dewsberry" at "09/07/2015 - 02:16":

"Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a
basic rate reduction from their income tax liability for their finance costs.”

They don't explain very well, do they?
Depending on how you read this it could mean very different things.

Hi.

I'm a long time lurker and relatively small btl landlord in scotland.

I know and was involved with john blavkwood in setting up Falkirk Councils landlord accrediation schme some 8 or so years ago. (Hi john i know you are active around here).

Im also an accountant full time.

I wonder if these changes will lead to more landlords using some sort of corporate structure to manage portfolios?

This is a complex area but wonder what people's thoughts are?

Ewan

Reply to the comment left by "Mervin SX" at "09/07/2015 - 00:30":

Mervin,

Can you explain:

"Before todays announcement:

Tax on Property Profit = £3360 (which is 40% of 12,000 minus 40% of 3600)"

I get the tax at 40% to arrive at the £3360 which is 40% of £8400, does this mean: '(which is 40% of 12,000 minus 40% of 3600)'

After today’s announcement (from tax year 2020-21):

Tax on Property Profit = £5520 (which is 40% of 12,000 minus 20% of 3600)

Similarly what does this mean: '(which is 40% of 12,000 minus 20% of 3600)' it still sys £3600?

Glad it's not just me struggling with this!

Reply to the comment left by "Dan Smith" at "09/07/2015 - 08:32":

Mervin,

I believe higher rate tax payers now pay an additional 20% on the 12k on top of their usual profit:

So they still pay £3360 tax + (20% of 12k) = £2400: total = £5760?