Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ros ." at "21/07/2015 - 12:32":

Re: Ross's suggestion for a name for the the new tax on interest (The Landlord tax) I have already started to call it by it's correct name: THE GANGSTER TAX!
Sorry, just my emotions running wild. I realize that we can't call it that, but it definitely represents my feelings. As posted before, I would have preferred to pay 60% income tax so no issues with paying tax. I just don't like the discrimination to landlords.

Reply to the comment left by "Jim S" at "22/07/2015 - 21:09":

Absolutely Jim. I also wouldn't care about paying a lot more income tax - just so long as it is income tax as we know it - i.e. a tax on income (after legitimate costs of running a business have been deducted). And, as you say, as long as it is not discriminatory. The awful thing about this is that we would (don't want to say 'will') be paying tax even if we're making a loss. It's so bizarre, it's off the scale - in terms of logic and fairness. All our emotions are running wild. But we have to not get mad, but get even.

Reply to the comment left by "Ros ." at "22/07/2015 - 16:59":

Hi Ros

I have returned to Megan Shaw’s example. The landlord needs to increase the rent by 20% for the extra real profit to equal the extra tax. This applies when he has 1 or 2 properties. But when he has 4 properties, he would have to increase the rent on them by 25% in order to pass the extra tax on to the tenant.

RENT INCREASES

If we were to increase rents to cover George's planned measure, the necessary amount could be calculated as follows : Following the "simple" rule that you pay 20% of your interest payment in extra tax, say for example your interest bill is £40,000 , thus you will pay an extra £8000 tax in 2020.
T earn that extra £8000 you need 100/60 x 8000 = £13,000 needs to be raised. Can this be done across the current portfolio ? With, say, 30 tenants, it would be an extra £433 each or £36 per month, so not too bad. On the other hand if you only have 10 tenants and a similar interest bill, They would each need to pay around £110/month extra each for you to just be where you are now.

Ros; I use an online portal website to advertise vacancies as and when tenants decide to move on. I have written to them tonight to see what their thoughts are re this budget announcement.

In my neck of the woods, over the past decade land & property capital values have increased massively (ie in line with long term historical averages over the past 70 years or so, where records are available). By comparison rents have not changed that much over the past 10 years.

James: I hear what you are saying about not giving George & crew ideas that may adversely affect others, not that I think he's reading every word in this forum (unlike the hpc brigade), BUT if George has decided that he's going to target land values to help fill the deficit void, then perhaps he should try and do just that - target land, ALL land regardless of usage or ownership rather than target the comparatively small fries? IE dumb his policy down and apply it to ALL property owners in every sector where they are non resident? Thereby not bankrupting just a few 'easy targets'?

Reply to the comment left by "Ros ." at "22/07/2015 - 20:40":

Hi Ros

The best conduit for spreading the message is through letting agents. Their business is threatened as well. As landlords exit the market, the pool of properties that they compete for will start to dry up. So they have an incentive to educate their clients.

Mark is working on a ready reckoner that any landlord can use to see what the effect of the proposal would be. When it is ready I suggest we send it to all the agents we work with in our town, and then to all the others.

Reply to the comment left by "Ian Simpson" at "22/07/2015 - 21:42":

Hi Ian.
As the rents received come to £260,000 pa., and I would need to raise £13,000, it is what I was kind of thinking then - a 5% increase? I think I can do it. The problem is that it doesn't take into account interest rate rises, but then they would have happened anyway. At least the increase would cover the extra bill the Government is landing me with. But I'm not saying I will definitely do this, as it often causes ructions with tenants even when you try and put £10 on a £400 pm rent, which hasn't been increased for 5 years! I think they get used to it never going up and a small increase can unnerve them. It may be easier with tenants who have been with us for a shorter time... and also whenever a house changes hands.

Another Planned Bombshell by Osborne..see below I have copied and pasted:

Bank of England may crack-down on buy to let mortgages

Both the Chancellor at the Treasury and the Bank of England (BoE) are becoming increasingly concerned about the continuing boom in buy to let and the amount of debt now accounted for in buy to let mortgages, which is said to be around £2bn.
Despite moves in the Summer Budget, removing mortgage interest tax relief and the wear and tear allowance, which could eventually curb this buy to let growth, it emerged yesterday at a Treasury select committee meeting that George Osborne is considering further measures to curb Britain’s buy-to-let boom.
This move is likely to involve the Bank of England using its wide-ranging powers to limit risky lending to landlords, amid fears it is fuelling another housing bubble, which has the potential to destabilise the banking system once again if there were to be another sudden downturn in the economy.
The suggested crack-down would likely put a limit on the amount that landlords could borrow on what might be seen as the more risky buy to let loans.
As it stands now, landlords are not subjected to the same tough credit lending criteria as are ordinary homeowners, and unlike homebuyers, they can take out interest only mortgages which means that short term, repayment amounts are less onerous.
It is being speculated that the BoE could be given tough more controls which would restrict the size of any loan according to the borrower’s income, the size of any deposit put down and the proportion of buy to let loans to other lending on a lender’s books.
Over the last 18 months or so it has emerged that approximately 20% of home loans have been for buy to let investments, fuelling a surge in private renting and an army of private landlords now thought to be over 2m strong.
Although this trend has provided much needed rental accommodation for those needing it, in the midst of a housing shortage in many locations, some argue that the demand for...

buy to let, and the surge of money going into it, has pushed up property prices, pricing out first time buyers and creating a vicious cycle.
Adding restrictions would aim to put a damper on what is otherwise a fairly unregulated mortgage market, because the fear is that if and when interest rates start to rise, those landlords unable to keep up their mortgage payments could dump their properties on the market en-masse, sending prices plummeting.
Mr Osborne indicated that a time frame for a consultation on the matter would be over “the next couple of months. I have just written a letter to [BoE Governor, Mark Carney]. It’s all imminent. It’s happening this year.”
The Chancellor explained that he did not want to put a stop small-time landlords from investing in property, by saying:
“There are many people who have saved hard throughout their lives to buy a little property and rent it out. Those are people we absolutely want to support and help. But I think there are concerns we have to address.”

Reply to the comment left by "Appalled Landlord" at "22/07/2015 - 21:54":

Ironically, I think a great way to get our message of unfair taxation out in the public eye, could be our own tenants. I know a lot of tenants want to purchase their own home and might not have much sympathy to landlords plight but there is also a huge number that are very happy renting. They will not be so happy with further rent increases due to the new finance tax. (I have decided to call it the finance tax) Let the tenants know whats on the horizon.

I personally feel that, Conservative government have potentially defrauded us by pretending to be on landlords side (pre-election) and have got nearly 2 million votes from this group which represents significant percentage of total votes they received.

On hindsight, I would have voted for Labour as historically property market has done much better under labour government, i.e CGT was held at 18%..and then immediately changed under Tories/Liberal government.

Osborne, has made following changes since he has emerged:

Pushed CGT from 18% to 28%...reduced PPR to 18 months from 36. (significant)

Abolished Non-Resident CGT rule (If you left country for 5 years then all gains previously were Tax free).

Introducing 20% extra tax as well as abolition of wear and tear allowance!!!

This is only the start...lets see how is going to finish...

To clarify, any confusion, Labour imposed massive threat to property owners but I do not think they would have bought any changes other than Rent caps, which landlords would have been at liberty to charge higher rents from the outset to recover any loss over the course of 3 years period.

I have always been Tories supporter..well at least since 2009 but I have kind of lost my faith.