Summer Budget 2015 – Landlords Reactions

We have to be little careful in regards to rent increase threats as he (Osborne) may find a way to restrict rent increase or might impose something that, he may make almost impossible for us to go down that route...."Caution Advised"

Reply to the comment left by "James Tallis" at "22/07/2015 - 19:17":

James,

By stating.."New Debt" I have implied, debt taken after legislation came in force therefore it should not apply to existing properties which were bought under different/current tax rules but only to those properties which were bought after legislation came in force.

I believe that might eventually be the case but at the moment nothing surprises me what he may or may not do.

BTW I have tried to unsubscribe to this thread 8 times now but it wont unsubscribe. Mark, can you help? I want to read it, I jsut dont want it filling my inbox!!

Thanks

IAn

Don't assume that Labour would do anything to reverse this if tehy got into power next time. If it brings in tax and it is the Conservatives fault they have nothing to lose by keeping it.

Reply to the comment left by "Ian Simpson" at "22/07/2015 - 22:37":

I can't but Neil can, I have emailed him a request and he will deal with it in the morning.
.

Reply to the comment left by "Ian Simpson" at "22/07/2015 - 22:37":

It's the same for me Mark.

Hi all. Just posting below a letter I'm going to send to my local (Labour) MP. Any ideas of things I could change let me know. And also feel free to adapt this and send it to your own MP, if you have a Labour one.

Dear Wayne.
To continue my correspondence about the discriminatory attack on landlords - we're calling it a levy or 'turnover tax' now, because the aim is to tax us on our turnover (minus some costs) instead of our actual income, I wanted to give you the facts on how this personally relates to me. I thought that if you can use your influence to try and stop this measure, which has far wider repercussions of all kinds that would be detrimental for many different people, it would be useful for you to have an example of one of our own constituents.
Last year, my business generated a gross rental income of £130,000. I spent £40,000 on mortgage interest and £40,000 on maintenance, repairs, insurance and so on. This meant that my net income (i.e. actual income) was £50,000.
If the new rule comes in, I will not be able to count the £40,000 paid in interest as a cost and it will magically become 'income' (even though it is money leaving my account and going to my mortgage lender).
A helpful landlord has calculated how things would initially change for me, using the method that someone called Megan Shaw (she is in charge of implementing and explaining it at the HMRC, I believe), comparing now with 2021, when the rules would be fully in place.
In both years I would have the personal allowance (nil rate band) of £11,000 and the tax calculated in the 20% band would be £6,400. In the 40% band the tax would be £2,800 this year but £18,800 in 2020/21, from which “relief” of £8,000 would be deducted. The effective rate on real income goes up from 18.4% to 34.4%.
Tax payable this year is £9,200 but in 2020/21 would be £17,200, an increase of £8,000. So my £50,000 income would be effectively further taxed to bring it down to £42,000. NB. I have no problem with paying a higher rate of tax, as long as it is applied to everyone (and doesn't single me out and discriminate against me for working in one specific field) and also as long as the tax is applied on my actual income; obviously, neither are the case here.
What is really worrying though is what will happen if, as expected, the interest rate creeps up by say 3% over the next few years. I always knew this would happen and would handle it as necessary - BTL is a risky business and I expect that. But, under the current rules, if the interest rate went up by 3% and I was therefore paying an extra £45,000 mortage interest pa (on a mortgage debt of 1.5 million), my actual income would go down from £50,000 to £5,000 pa. A few years back I was in a situation where my income was not quite as low as that, but low enough for me to qualify for tax credits, free dental treatment and so on.
Under the new rules though, although my actual income would be £5,000 pa (my residential mortage payments are £900 per month, by the way), the HMRC would not accept that that was my real income. They would now say that my real income was £50,000 plus £45,000, making a total of £95,000 pa and tax me on this fictitious/imaginary 'income.' I wouldn't be entitled to tax credits and would have to find tens of thousands of pounds each year to pay 'income' tax, including higher rate income tax (!) on my non-income. (Similar scenarios will be faced by more than half a million landlords. And the first resort they will have to try and build savings to be ready for this new tax and delay bankruptcy will be to consider raising rents - although this would only help slightly as the amounts demanded by HMRC could be so huge, depending on the individual's mortgage interest liability).
Wayne, imagine if they did this to the country as a whole? Obviously they couldn't - it's like something a fascist/communist/totalitarian regime might try. They've singled out private landlords because they know we are already demonised by some sections of the public; but if they can set this precedent of taxing someone on a cost of running their business, then what next?
I hope I have explained the scenario clearly and in a way whereby you can see how unjust it is and how it should under no circumstances be allowed to go ahead. And I hope you can convey this message to other Labour MPs so that they can also become our defenders. It's not a natural union between Labour and private landlords, but this is a question of justice and fairness, so I hope the Labour MPs will be able to help us with this; it is the thin edge of the wedge.
Sorry for bombarding you with letters recently - this is my third in about 10 days I believe. But many people, including landlords, still haven't twigged that this is what George Osborne has actually proposed - because he set up a smokescreen describing it as something else entirely.
Thanks for you time.
Yours sincerely

PS.
The ostensible justification for this move was to somehow enable first time buyers to buy. It is hard to see how attacking one group (private landlords) automatically benefits another group (first time buyers). If the Government wants to help first time buyers, they should help first time buyers.
I also think there is a misconception that if landlords need money they can just sell a house and use the proceeds to get by on. Speaking personally, I remortgaged most of my houses in 2007 to buy a few more and so even if I wasn't tied into mortgage deals, if I did sell, most of the proceeds would go straight towards paying my Capital Gains Tax bill. It wouldn't leave me enough money to live on and pay tax on a fictitious amount (honestly, I don't think you could make this thing up; it's why so many landlords haven't understood and/or are still in denial about this).

I too support the movement Mark, thanks for taking the charge, lets get all the people and resources we can together.

Reply to the comment left by "Simon Roads" at "23/07/2015 - 09:52":

Please ignore the above figures (not properly awake yet !) Mark EDITING needs sorting asap !!

Should read:

Ros, (rent 130k – exp 40k – int 85k) will leave you 5k as you say, with a tax bill of approx 9,523 based on the artificially inflated 90k profit (130k-40K)

A tax rate of 190% & no actual income for the year , rather a cost of 4523, but as your tax documants state 90K any means tested assistance ie, Child benefit, tax credits etc will not be available to you due to your artificially inflated income of 90k.

As we currently understand the propsals. half asleep - someone check the figs !

It does make a limited company more attractive as dividend income is excluded from the calculations, according to HMRC