Summer Budget 2015 – Landlords Reactions

Stuck tapping on ancient phone here with ltd Internet ... Night mare! We need a 4th example and it needs to be Megan Shaws hmrc eg for all the reasons I have prev stated , when media get on this we need hmrc own eg which covers many bases and points and is a much more real eg

Reply to the comment left by "Appalled Landlord" at "30/07/2015 - 00:39":

Appalled Landlord - I have changed examples 2 and 3. Please review and confirm if all changes have been made correctly.

Example 2: Dave and Margaret are a married couple. They consider themselves to be entrepreneurs and operate a sizeable buy to let business. They have invested in property to provide a livelihood for themselves and to provide a pension when they retire. They have tenants who are professional people in employment but most of their tenants are in receipt of housing benefit. Their only source of income is from their rental business. Their property rental assets are jointly owned and they split the rental income 50/50. Properties have been acquired over a period of nearly three decades. They have recently fixed their interest rate at 4.99% for 10 years to protect their business from risks associated with rises in interest rates. That seemed to be the sensible thing to do at the time. Their rental income is £600,000; their mortgage costs are £350,000; and their repair and other tax deductible costs are £200,000. Their net rental profit is £50,000. They are currently basic rate taxpayers. Their taxable income, after deduction of their personal allowance, is £28,000. Under the current tax system, Dave and Margaret each pay £5,600 tax. Their effective tax rate over personal allowance is currently 20%.

Under the proposed tax system, because Dave and Margaret will not be able to offset any of their mortgage costs against their rental income, they will become higher rate tax payers and their individual taxable income will increase to a staggering £400,000, the same as their rental profit because they lose their personal allowance at £121,000 each. The actual tax they would each pay would be £41,100, making £82,200 in total. This is £32,000 more than they actually make in profit from their rental business.

Their effective tax rate on their real profit is now 155.6% as the amount of tax paid exceeds their income. Dave and Margaret are now higher rate tax payers. For Dave and Margaret, the Government’s proposal is catastrophic as their business is no longer sustainable as the tax they pay exceeds their ‘real profit’. Dave and Margaret are now very worried and feel trapped. Their once profitable business is no longer viable. If they were to look at selling their properties they would incur early repayment charges, incur selling costs, be required to pay a significant sum in Capital Gains Tax and repay their outstanding mortgage balances in full, the sum total of which would be greater that the proceeds of sale. They are responsible landlords and are concerned about what will happen to their tenants if their properties are repossessed, especially those tenants in receipt of benefits. The are scared to share their concerns with their tenants as they fear that their tenants may give notice to quit and look for a tenancy that is more secure.

Example 3 : Emily is a civil servant and has non-property income of £40,000. She started to invest in property to create an additional income stream to fund her children through university. Her rental profit is £25,000 and she pays £35,000 in mortgage interest on her rental properties giving her a total income of £80,000. Her total tax bill under the current tax system would be £15,200, of which £9,400 arises from her rental income. This would increase to £22,200 under the new tax regime. Emily’s effective tax rate on her real profit of £25,000 would increase from 37.6% to 65.6%. Emily is now concerned that her tax bill has increased by £7,000 and that her profit from her property rental business has been substantially eroded. She is becoming increasingly concerned about risk, especially knowing that if interest rates go up, her margins will be further eroded. This was not what she had in mind when she used all her savings to invest in property to fund her children’s further education. She assumed that the long established principle of income – expenses = profit would remain and that tax payable would be based on profit made. The Government’s proposal fundamentally changes that formula.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "30/07/2015 - 01:05":

Hi BTL I S

Nearly there.

Example 2: the actual tax they would pay would be £77,800”. (We must stick to the same figure as on other websites.) £38,900 each. £27,800 more than their profit. 155.6% is correct.

Example 3: total income £65,000

This would increase to £22,200 under the new tax regime, £16,400 of which would arise from her rental income.

The percentages are right.

Over and out!

Take action each day to scrap the mortgage relief levy before tenants are forced out and rents up.

Please share what you did yesterday to scrap this tax.

Please share what you will do today.

This will inspire others to take action.

Lets all Follow One Course Until Successful (FOCUS).

Reply to the comment left by "Appalled Landlord" at "30/07/2015 - 01:37":

Changes made Appalled Landlord. OK now?

Example 2: Dave and Margaret are a married couple. They consider themselves to be entrepreneurs and operate a sizeable buy to let business. They have invested in property to provide a livelihood for themselves and to provide a pension when they retire. They have tenants who are professional people in employment but most of their tenants are in receipt of housing benefit. Their only source of income is from their rental business. Their property rental assets are jointly owned and they split the rental income 50/50. Properties have been acquired over a period of nearly three decades. They have recently fixed their interest rate at 4.99% for 10 years to protect their business from risks associated with rises in interest rates. That seemed to be the sensible thing to do at the time. Their rental income is £600,000; their mortgage costs are £350,000; and their repair and other tax deductible costs are £200,000. Their net rental profit is £50,000. They are currently basic rate taxpayers. Their taxable income, after deduction of their personal allowance, is £28,000. Under the current tax system, Dave and Margaret each pay £5,600 tax. Their effective tax rate over personal allowance is currently 20%.

Under the proposed tax system, because Dave and Margaret will not be able to offset any of their mortgage costs against their rental income, they will become higher rate tax payers and their individual taxable income will increase to a staggering £400,000, the same as their rental profit because they lose their personal allowance at £121,000 each. The actual tax they would each pay would be £38,900, making £77,800 in total. This is £27,800 more than they actually make in profit from their rental business.

Their effective tax rate on their real profit is now 155.6% as the amount of tax paid exceeds their income. Dave and Margaret are now higher rate tax payers. For Dave and Margaret, the Government’s proposal is catastrophic as their business is no longer sustainable as the tax they pay exceeds their ‘real profit’. Dave and Margaret are now very worried and feel trapped. Their once profitable business is no longer viable. If they were to look at selling their properties they would incur early repayment charges, incur selling costs, be required to pay a significant sum in Capital Gains Tax and repay their outstanding mortgage balances in full, the sum total of which would be greater that the proceeds of sale. They are responsible landlords and are concerned about what will happen to their 187 tenants if their properties are repossessed, especially those tenants in receipt of benefits. The are scared to share their concerns with their tenants as they fear that their tenants may give notice to quit and look for a tenancy that is more secure.

Example 3 : Emily is a civil servant and has non-property income of £40,000. She started to invest in property to create an additional income stream to fund her children through university. Her rental profit is £25,000 and she pays £35,000 in mortgage interest on her rental properties giving her a total income of £65,000. Her total tax bill under the current tax system would be £15,200, of which £9,400 arises from her rental income. This would increase to £22,200 under the new tax regime of which £16,400 would arise from her rental income. Emily’s effective tax rate on her real profit of £25,000 would increase from 37.6% to 65.6%. Emily is now concerned that her tax bill has increased by £7,000 and that her profit from her property rental business has been substantially eroded. She is becoming increasingly concerned about risk, especially knowing that if interest rates go up, her margins will be further eroded. This was not what she had in mind when she used all her savings to invest in property to fund her children’s further education. She assumed that the long established principle of income – expenses = profit would remain and that tax payable would be based on profit made. The Government’s proposal fundamentally changes that formula.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "30/07/2015 - 07:16":

Absolutely BTL. I love that.
My report back: I wrote to Andrew Pierce at the Daily Mail - a long, detailed email that took me nearly 2 hours (actually the day before yesterday!) and today I will send a different version of this to the Daily Express or Telegraph, trying to address it to someone who looks like they could be sympathetic.
If necessary I will liaise with the Petitions Committee - I emailed and telephoned them yesterday.
I also tried to do what you have just done and motivate our group to stay focused and positive.
Hopefully, I will think of other positive steps to take today, however small, however much it might look like they could be futile - because all these efforts go somewhere.

Reply to the comment left by "Ros ." at "30/07/2015 - 08:10":

Winners make things happen, losers let things happen.
.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "30/07/2015 - 00:24":

Superb BTL

I think it's an interesting development that Generation Rent have had their funding cut, as they have been pushing so hard for this tax change.

Does this help our cause? They have other things to concentrate now with their crowd funding.

Reply to the comment left by "Trendo " at "30/07/2015 - 00:55":

Trendo - can you please direct me to Megan Shaw's example.