Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Gentle Landlord" at "26/07/2015 - 11:30":

Hmm..

If that is so it no longer becomes a capital gains tax, I doubt this would happen ,,imagine a landlord buys a house for 500k then sell for 600k his CGT at 28 percent will be more than the 100k profit. I don't think this would come in, it would crash the market and create economic instability something the BOE and the government do not want

Reply to the comment left by "Mark Alexander" at "26/07/2015 - 11:05":

Yes Mark I believe that is exactly what we should do and I've already started looking into the e-petition process. I believe that you can only have 80 characters in the title. More importantly I am in the process (with colleagues) of registering a site with all the arguments on it. I am in touch with Scottish BTL privately who has agreed to assist with wording. The site will hopefully have titles that most people in the country will fit into in some way or other, and how the change will affect them. There will of course be links to the e-petition.

Reply to the comment left by "Gentle Landlord" at "26/07/2015 - 11:22":

We wouldn't be the first country to do that if he did. But I don't think it would specifically be a tax aimed at buy to let landlords. In Switzerland, where I recently spent a number of years living. as well as income tax there is an element of wealth tax......assets are taxed based on their values (although it must be said this is set at a tiny amount....in the region of 0.05% I believe). It's not just buy to let's that would be affected but anyone who owns a second home, or any other valuable asset..

Reply to the comment left by "John McKay" at "26/07/2015 - 11:46":

Hi John

Please bear in mind that few of the larger websites (us included) will NOT link to a new website where the motives of the owner cannot be established. Words alone do not establish clear motive. Data capture or subsequent use of the website for monetisation will always be cynically suspected. Furthermore, it takes a lot of effort to attract people to a website so the last thing the owners want to do is redirect them to another, especially where the motives of the owners might be questionable.

The only websites we tend to link to are operated on .gov or the likes of Wikipedia.

Most website owners have no problem with linking to URL's pointing exclusively and directly to PDF documents, we would happily link to those.

Have a look at how MK Landlords made their spreadsheet to help landlords to calculate the new tax levy downloadable >>> http://tinyurl.com/Budget-Proposals-2015 - as you can see, there is no room to doubt the integrity.
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Reply to the comment left by "Renovate To let" at "26/07/2015 - 08:33":

Hi Renovate To Let,

I'm not one for overstating some of the possible doomsday scenarios for the overall market - it's simply too hard to predict. But I think the point you have made is a very important one.

As I mentioned a few posts back, according to local agents in my part of central London, flat sales are already split almost entirely between first time buyers (almost all with help from mum and dad) and investors.

Investors account for 20% of purchases. FTBs for 80%. This is across the board - new and old properties.

To pay down my 40% LTV debt and CGT I would need to sell off four of eight flats currently let. To maximise sale value I would need to market and sell them vacant, i.e. give notice to the current tenants.

Statistically, even before taking account of the drop in investor interest, *not a single one* of the flats would be bought by investors and all would be lost from the rental market, which locally is struggling to keep up with demand.

Most of my properties are being let to young professionals in their twenties: friends sharing, couples moving in together for the first time, people with temporary work placements in London some of whom own a home elsewhere. Generally not people looking or in a position to buy at this stage.

I believe the solution is simple.

Landlords with properties held in their portfolios should be allowed to transfer these into a limited company (for tax purposes these should be based at the value at which the property was originally purchased) but given an amnesty on any CGT tax liability. If and when a property is sold, the CGT should be based on the original purchase price, and not the price at the date of transfer.

This will level the playing field for all. I do not agree with the proposal that existing investors be exempt from the proposed tax changes, as this will create a two tier system, giving one group of property investor an advantage over another.

I say this as someone who owns a small business, actively invests in the stock market, looking to move property rental into a limited company, and someone who manages my own SIPP pension. Basically, the past few budgets have seen changes that have impacted my position on many fronts. Earlier posts have alluded to how the last budget has targeted the buy to let sector.....this is just not true...many more small business owners and pensioners who rely on dividend income have been equally affected. But to the man on the street....this on face value to them appears to be a good budget....and it is to this class of people that the budget has been targeted at.

Any campaign should be targeted and focussed on what is realistically possible (given the current political and economic landscape), and care should be taken when banding around some of the more alarmist claims as to the consequences of the proposed changes.

Two examples:
1. Yes a healthy rental sector IS important, and we all know the reasons why…mobility etc. And yes, a large number of people that rent, are happy renting, but at the same time, one will probably find that an even larger portion of people who rent, would rather buy. Increasingly people are finding that they are being trapped in rental…..and this needs to be addressed.

2. I don’t believe most people outside of our circle will really believe that the measures will bring about the collapse of the property market. There is huge pent up demand…..the issue is affordability. In a market with such latent demand, market forces will see the withdrawal of indebted private landlords with those that operate through limited companies. Of course, currently the parameters of working through a corporate structure are different….one of the big differentials being the dearth of available financial products, but I suspect it will not be long before you see current BTL move into the limited company funding space.

GO is already giving FTBs a big help by creating the new ISA where FTB can put money in and when they use the funds to put down a depoist the government will add an extra 20% up to a maximium of £3,000 making the amount put in by the FTB £12,000.

It could be argued that BTL landlords are being asked to fund the generosity of the government.

Reply to the comment left by "Ros ." at "26/07/2015 - 09:10":

"We have a combination of tenants who could probably never afford to buy and have never expressed that ambition and/or young people who are far from wanting to commit to one area – notably students and tenants in their 20s in general.

I think the Government often acts with London in mind and applies their conclusions to the rest of the country."

It is the same in London. Most of my professional tenants are young sharers who need flexibility because don't know where their job is going to take them, don't earn enough yet or are saving up for a deposit; couples moving in together for the first time; people relocating from abroad or elsewhere in the UK. The latter often own property elsewhere which they do not want to sell.

And not all cannot afford to buy. Some can most definitely afford to but choose to rent because they can afford to rent somewhere much nicer or in a better location.

Reply to the comment left by "Mark Alexander" at "26/07/2015 - 12:02":

I've already seen Alex Caravello's spreadsheet Mark.

We have no intention of capturing people's data. The site states the arguments and will have links to the e-petition, nothing more. Our intention is to spread the domain name around as much as we can but we're not putting any pressure on anyone to link to it. If they wish to then so be it. If they don't that's fine

I also expect other similar sites to spring up and do the same, which is completely fine.

What amazes me is that nobody has started the e-petition yet. The Govt site has been back up for several days now and no e-petition. I would have expected one of the larger Landlords bodies to have done this by now but nothing.

Reply to the comment left by "James Tallis" at "26/07/2015 - 12:16":

Good post. I agree your suggestion is a good one in principle although I think it would need to be extended to SDLT.

I also agree with both your examples. We need to be careful that our predictions of woe for the market are not so dramatically weighted towards the worst case scenario, or the "we're doing everyone a favour" that it makes our concerns easy to dismiss.

Further, as mentioned previously, others I know who are in corporate structures seem to think they have been just as badly hit by the changes to dividends. It would be helpful for an accountant to work out some illustrations of how BTL income will be affected for people in corporate structures. We need to clearly illustrate the imbalance.

My tax burden is likely to rise from 30%ish to mid fifties - and a 1.5% rate rise will take it to the mid 80%s. Most of my income is letting. If I were incorporated and taking dividends what would the effect of the budget be? Illustrations like this would, I think, help strengthen any argument.