Summer Budget 2015 – Landlords Reactions

I have written to my MP asking him to ask the Chancellor the following questions:

1) Does the Government consider it is reasonable for any business to have to pay more tax than they actually make in profit?

2) Does the Government consider it is reasonable for any business to have to face a huge tax bill when their business makes a loss?

3) Can the Government provide any other examples where a business is taxed on their largest cost?

4) Does the Government accept that some people will lose their personal tax allowance as a result of the change as their taxable income will exceed £121,000 but their real income will be nowhere near this level? Is this a policy objective of the Government? Does the Government consider this to be fair?

5) Has the Government considered what the cumulative impact on the private rented sector will be of its proposal to restrict finance cost relief when this is combined with the withdrawal of the wear and tear allowance and the expected increase in interest rates?

6) Does the Government appreciate that many landlords face financial ruin and possible bankruptcy as a result of the changes proposed in the summer budget?

7) Has the Government considered the impact of the change on banks and other lenders? Many will be faced with having to repossess properties and will find it difficult to sell these properties as the market will become saturated with properties being put up for sale at a time when demand for home ownership is low.

8) Does the Government appreciate that there is a very real risk of there being another housing crisis with many private rented houses being repossessed and tenants being made homeless? There is a real risk that the Government’s proposal will cause instability in the housing market and uncertainty for landlords and tenants?

9) Does the Government accept that as a result of their proposal there is likely to be another collapse in house prices and this will have knock on consequences for the scale of house building across the UK and that this in turn will reduce the amount of affordable homes that are built as much of the land for affordable homes comes via planning obligations entered into between councils and housebuilders.

10) Does the Government accept that many landlords will be forced to restrict the amount of money they spend on repairing and improving properties because they will face much higher tax bills in future?

11) There is a shortage of social housing all across the UK. If the supply of rented properties for people on benefits significantly reduces as a result of the Government’s proposal, who will house these people in future?

12) Has the Government considered the impact that their proposal will have on existing tenants? Does the Government appreciate that restricting or reducing supply will push up rents in the private rented sector? Many landlords will be forced to increase rents to try to deal with the tax bills they will face. I am aware of landlords who are already seeking to increase rents in anticipation of the change.

13) Does the Government appreciate that many basic rate tax payers will become higher rate tax payers as a result of the change and is this a policy objective of the Government?

14) The Government’s impact assessment suggests that 1 in 5 landlords will be affected by the change. Can the Government confirm how many properties will be affected? Can the Government confirm if the 1 in 5 includes those basic rate tax payers who will become higher rate tax payers as a result of the change?

15) The impact assessment states that there will be no impact on business. Can the Government provide evidence to back this up? Will the Government accept that landlords provide support for local economies by employing solicitors, letting agents, accountants, mortgage brokers, plumbers, joiners, electricians, builders, painters, cleaners, etc. and that the adverse impact on business will actually be very significant ?

16) Is it a policy objective of the Government to reduce the number of rented properties owned by individuals to make way for large private companies and institutions to enter the market and dominate it?

17) The Chancellor has written to the Bank of England asking them to draw up proposals which will give the Bank more control over the currently unregulated buy to let market. This is likely to result in lower loan to value mortgages and higher deposits being required. Does the Government consider that this action alone could sufficiently temper the buy to let market and achieve the Government’s policy objective without having to introduce the proposed restriction on finance cost relief? Will the Government wait on the Bank of England’s proposals before deciding if it will proceed with the proposals to restrict finance cost relief?

18) Will the Government put its current proposals to restrict finance cost relief on hold and carry out consultation with stakeholders on more appropriate measures to achieve its policy objective of controlling the growth of the private rented sector?

Presumably this budget proposal doesn't affect sharia-compliant mortgages, or short term fixed rate mortgages where most of the cost is fees, which are allowable expenses. I think the mortgage industry will adapt to this.

Reply to the comment left by "Duncan McFadyen" at "25/07/2015 - 12:42":

Fees to mortgage lenders are finance costs so that doesn't help you.

The Jury is still out with regards to Sharia Mortgages, I have heard two very logical arguments which are diametrically opposed.
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Reply to the comment left by "BTL INVESTOR SCOTLAND" at "25/07/2015 - 12:21":

Wow!

Welcome to Property118, what a superb list of questions.

I am going to send these to a reporter I am working with at The Telegraph.
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When one agent got my email and letter: http://www.property118.com/budget-2015-landlords-reactions/76164/comment-page-111/#comments

he said he couldn’t find HMRC’s example, so I sent him this link to syed shah’s post:

http://www.property118.com/budget-2015-landlords-reactions/76164/comment-page-48/#comment-58439

When I posted previously that the person in the example would pay all of his profit to the state plus 50% I was wrong. This is just the extra tax he will pay, on top of the 20% that he currently pays. So in fact he will pay over all of his real profit to the state, plus 70%.

He would need to increase the rent by 20%, in order that the extra real profit would just cover the extra tax that he would pay compared to today. His net income would remain the same at just over £35,000.

The increase in rent would be about £3,000 compared to today, and the increase in tax compared to today would also be about £3,000. This means that the tenants would pay the increase in tax that will arise from the proposed levy on finance costs. The government’s gain would be the tenants’ loss.

So if any tenants are reading this and gloating about the threat to our finances, they need to realise the effect it will have on theirs. We really are all in this together.

hi i know we all are making a petition to prevent ,or to minimise the change this will bring.
has anyone creative been able to figure out a way around this using limited company or any other route and how would this be possible if someone can share their thoughts if possible with an example .
The only reason i am saying that is so we can be prepared in one way or the other .

Just listened to BBC Money Box "special" on Radio 4 re the tax changes.

Yet again, incorrect reporting. They stated that interest relief would be restricted to basic rate.

I have sent a complaint as this misinformation coming out to the 2M UK affected landlords MUST stop. The HMRC guidance document and the draft legislation before the House is very clear.

I have added the download link to the tax calculator spreadsheet to the body of the article leading this discussion thread.

More landlords will find it this way and members asking for examples to be calculated can be directed to it far more easily.
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Reply to the comment left by "BTL INVESTOR SCOTLAND" at "25/07/2015 - 12:21":

Hi BTL I S

Stupendous letter!

As regards point 6) HMRC’s impact assessment is that “The measure is not expected to impact on family formation, stability or breakdown.” Except that once a landlord has used up all his financial resources to pay the annual levies, HMRC will bankrupt him - if his lender has not already done so. He will be homeless, possibly divorced, and unless he commits suicide, a burden on the state.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "25/07/2015 - 12:21":

Bravo.....Hats Off To You Sir.