Summer Budget 2015 – Landlords Reactions

After several exchanges with his accountant and after seeing a lot of the material presented on this forum, as well as clculators and hmrc example this is the opinion of a LL friend's accountant.

"It seems to me that there is an awful lot of scaremongering going on in your buy-to-let community.
I can only reiterate what I told you before. That is that this new tax change only affects higher rate tax payers which you are not.

The inference from the enclosed example calculations is that by adding the profit before finance charges to your other income then it will place you and a host of others automatically in the higher rate tax band.
I am positive that whoever has done this is wrong in the way he/she has prepared the calculation.
We have received many commentaries from leading tax authorities in the country regarding the Summer Budget. No one has made the suggestions that your commentator has made.
I have forwarded your email and link to my expert tax colleagues and we will get back to you possibly by tomorrow.

Don't start selling any properties just yet!!"

Looks like it is all uhill for the time being !!

Reply to the comment left by "Harold Levine" at "29/07/2015 - 11:13":

He could have 3 or 4 properties - that's still modest. He provides homes for 3 or 4 individuals, put another way. He provides a service to enable those not able to buy yet to work, live and save.

It's when normal profit, under this current system, is suddenly transformed and distorted, that's the hideous bit. How could interest, a definite loss, suddenly be added to income? I think unless the calculations can resonate with those in a business, trade, that involves borrowing on a large scale (for diggers, fork lift trucks or other assets) I don't think people will relate to the figures. I hope I'm wrong. My lodger thinks the landlords had it coming; they've been getting away with it for too long. Media reported it as a gravy train.

Reply to the comment left by "Connie Cheuk" at "29/07/2015 - 11:42":

I think the HMRC calc is the most powerful example :

takes std rate payer to high rate
removes all profit
illustrates a huge tax liabilty
uses a set of figures people can relate to
demonstrates how completely unfair this is
shows destruction of "profit=income -expenses" fundamental
shows that that individua has no choice but to get rid of prop or pay down fonance or put up rent

it does everything we need it to do

and has HUGE credibilty as provided direct from HMRC, along with contact details for verification - as meganshaw has her name and contact details on the bottom of al docs - i say ok to put that in as well.

Reply to the comment left by "Connie Cheuk" at "29/07/2015 - 11:54":

Joe may also own a shop or business premisis, he is very confused as to why his int payments on his shop premisis are an allowable expense, but not on his BTL property , He, along with most soletraders are beggining to get very worried & disillusioned that if the new proposals are approved, that the measures may get extended to small business as well.

Reply to the comment left by "Mark Alexander" at "29/07/2015 - 10:52":

This is the type of ignorance we're up against. Landlord bashing will be rife; we're all greedy and taking advantage of the housing crisis, lumped in with the investors abroad. Those wanting to get on the property ladder blame us - the government has already made us scapegoat. The emphasis has to be the percentage of tax, never mind what the rental income. End tax should not be over 100% ! That would resonate with the ordinary Joe. What if he were taxed over 100% of his profit, whatever business he's in!

Reply to the comment left by "Trendo " at "29/07/2015 - 11:42":

Trendo - I look forward to hearing what the accountant came back with "tomorrow"!

Reply to the comment left by "Connie Cheuk" at "29/07/2015 - 12:10":

I'm sure you're right Connie because we're fighting momentum. It's been happening in the press and with statements from the Housing Charities for so long that the Great British Public are brainwashed.

Did you hear Jeremy Vine on R2 when the budget changes were being discussed. He had a LL phone in that had 88 properties and you could almost hear Mr Vine getting ready to pull him apart (after all, he had just said that no-one likes Landlords). When the LL said how much his mortgage totals were, poor Jeremy had to take a second to compose himself. Clearly he, like so many others, thought that it's all about taking money, money, money, with no thought to the downside and the considerable risk a LL takes with his own money and the lender's.

It's a simple business principle that if you take risk then there must also be reward or there's no point in doing it. The Government hasn't been able to provide adequate housing stock for the country's needs to do so and we've taken the risk. Now we can see just what a risk it has been when a Conservative Government (that is supposed to understand business principles) has betrayed the sector that's been housing 4 million of the country's inhabitants.

We need to show - very strongly indeed - that rents WILL rise and not because we want them to, but because the Government has forced them up.

The tide WILL turn, mark my words, but we need to work on it to make it happen.

This could actually BE the turning point. When the Charities start waking up to the fact they're going to have one hell of a problem soon, then they'll switch sides very quickly. They have to.

Thanks for all the comments on the Q&As. Keep them coming. I will take on board the comments made and post a revised version tonight. I agree with the comments about the examples, I'm not entirely happy with them as they are and will make changes.

I have submitted the following Freedom of Information request to HMRC.

Freedom of Information Act 2000
This is a request for information under the Freedom of Information Act 2000.
The request is in connection with the Government’s plans to restrict finance cost relief for individual landlords.
HMRC has stated that 1 in 5 landlords will be affected by the proposal to restrict finance cost relief. I would like information on the number of properties that are affected by the proposal to restrict finance cost relief.

FWIW i would leave the Dave & Margret example in , as it illustrates the utter devastion that will come about if these proposals are implemented , but expand the example to show that many families will likely be affected as they will need to find new homes when big portfolio LL are destroyed like this.