Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "29/07/2015 - 00:47":

"There is a mortgage interest relief calculator available on Fylde Accountants website. Here is a link:

http://www.fyldetaxaccountants.co.uk/

You can also get a copy of Stephen Fay’s YPN article on the site."

The mortgage calculator is garbage: it doesnt account for >£150K taxable income nor loss of personal allowance >100K ....and that is on an accountants website ? needs sorting asap!

Article is well presented tho and action options are good to see.

Reply to the comment left by "Trendo " at "29/07/2015 - 01:37":

Hi Trendo

The £1,800 is only the extra tax he would pay, on top of the 20% (£240) that he currently pays on his rental profit. This makes a total of £2,040 which is 170% of his real profit.

Reply to the comment left by "Appalled Landlord" at "29/07/2015 - 02:33":

Yes sorry ..of course it is . (late !)

Reply to the comment left by "Appalled Landlord" at "29/07/2015 - 02:26":

PS The effective tax rate on her real profit of £25,000 will go up from 40% to 80%.

has anyone noticed.. someone has already started a petition

Don't think they would accept any further petitions, as the subject will be duplicated.

Some thoughts re the letter - couple of amends to consider and others are challenges it makes me consider as I read it.

The challenges are to improve our thinking and lobbying if we can. (not BTL IS but for all on forum)

In plain english what does this mean?
Amend:
You compare 100% currently allowable moving to 20%.
This needs thinking about to avoid correction from a reader - ie is it currently 45%, 40% v's 20% - or if compared to 100% ie fully deductible it would move to 50% (for a 40% HRT) ie for a 40% HRT they are 'effectively' only deducting half their finance costs.

Challenge:
"No other business is taxed in this way. ''
''No other business is taxed on interest on loans taken out to buy assets that generate taxable income."
Thoughts on this are that ''no other business'' buys appreciating assets on interest only basis to maximise the leverage this provides.
Ie I buy a £200k machine in my factory - the business objective is to repay the debt in that in 5 years before I need another machine in say 10 years.

Amend:
"Thousands of LLs will be impacted"
I imagine it will be more - this implies <10k. Interesting to know how many but 'thousands' does not sound a lot in the scheme of 1.6m landlords.

Challenge:
I personally believe the point being raised by this forum is well know and understood by the policy maker. And 'Dave and Margaret' who after decades of trading only receive £50k profit are already in trouble because when rates double (which is the very least they will do one day) then their interest is £700k anyway....they are already have a model fundamentally flawed.

Indeed a 20% interest in finance costs should be 'simple' for us to swallow. This will be the fundamental argument against any lobbying ''If we can't afford this - then imagine how we will would cope if interest rates double.''

Finally thought:
I think the second point from Trendo (posted 29/7 01:37) pulls out the key point. His point 2 which mentions the impact on other things eg CSA payments, child benefit etc. But this point by Trendo could be the MAIN point. It's potentially an impact not considered by the policy maker.

This changes taxable pay - and fundamentally feels worthy of challenge. I have mentioned a few times......I believe policy makers know the impact we are highlighting and it's deliberate. But this small point possibly was not considered and it is due to the methodology of the calculation.
So if we left the calculation how it was....but they added tax afterwards for HRT then the impact would still be the same for some but many many issues would be sorted
Ie BRT could not become HRT, Taxable pay stays the same, No profit - no tax.

Summary Suggestion:
I would have been tempted to put in a few lines the key points and appendix the examples i.e. attach them outside the letter but refer to them inside - but that's easier said than done.

Still think Dave and Margaret are a poor advocate example....many will feel they deserve what is coming. £10m (assumed if interest is £350K) debt for a married couple - the man down the pub will tell you it was a risk not worth taking and what did they expect to happen when interest rates are 7% instead of 0.5%.

Finally, if the government want to do something my compromise would be:
1) The interest only model should be addressed. Its not used in business so if we are a business why do we use it. (impacts directly on me that one - ouch)
2) Borrowing criteria amended - no extra borrowing on higher values over time. Particularly borrowing the next deposit on the previous house.
3) IF we tax at a higher rate - keep the calculation as is...but add a tax charge back in for HRTs. Avoids the qwerks e.g. child benefit, CSA payments etc etc.

We are HRTs and Landlords....easy political targets and the more we focus on the extra tax the more it will gain support from the other 60m non landlords.

Its is a great effort though and I hope it helps bring visibility to the issue. tax needs to be fair, proportionate and simple - if it is not then it will cause problems.

Thanks for the letter - really gets the grey matter going.

Reply to the comment left by "unahb1 " at "29/07/2015 - 09:34":

Hi there, Mark and Ros know of this. Mark will be speaking to Ruhal to join forces with us. The petition was created in good faith, obviously. Anyway, Mark has it in hand. Hold fire on signing, though. If you read the threads from last night - page 140, I think, you'll understand what happened.

Reply to the comment left by "unahb1 " at "29/07/2015 - 09:34":

Yes this is in hand, we made contact with Ruhil last night and will be chatting with him later today.
.

Reply to the comment left by "Trendo " at "29/07/2015 - 01:37":

Your Point 2 (below) is worthy of focus. I believe the impact of this change is very deliberate. The more we keep saying we are being over taxed and even not making a profit, the more the focus will shift to...''so no profit, how much interest do you pay? Crickey, how much so you owe?'' - er, sympathy lost.

Your point to is below
''2… Also artificial inflation of taxable income will result in loss of working /child tax credits & Child benefit for many LL Families, also impact on CSA /maintenence payments if calculated as percentage of income''

Finally
So I advocate higher tax....but keep the calculation as is it...then levvy a charge on AFTER if you are a HRT. Also Interest Only mortgages to cease moving forward...and for all debts to move to capital and interest over a period of adjustment. Ruins my plans - but I get why that is.

Imaging I will be on my own on this.....

Reply to the comment left by "Phil Landlord" at "29/07/2015 - 10:01":

Following on another step ..... As most LL will now have hugely inflated taxable incomes, they will have no great problems getting bigger overdrafts, higher credit card limits, unsecured loans and general finance and compounding the over extension of debt that a lot already carry.

It is ridiculous to pervert the tax system in this way.