Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Jim S" at "01/08/2015 - 13:19":

Well said Jim. You make extremely valid points very eloquently.

I'd also add that for the last decade and a half it's the BTL Landlords that have really kept the house builders with a market. Now we are to be frozen out what will they do, other than scale back output. A lot of people are saying that this tax will be good for ftb to get on the market and that is simply not true either.

FTB's will look for a dropping house price scenario but they'll need much bigger deposits as lenders will be so cautious in a declining market. Also we already have an annual short-fall of 100,000 new builds a year and if the house builders now no longer see profit then they will stop altogether. How is that helping the first time buyers??

As we repeatedly say, this tax is going to hurt so many people other than Landlords. Why is it Mr Silman doesn't get it?

Various thoughts in response to recent comments on this thread:

Gentle Landlord: ‘I have sneaky suspicion that “Accountants” are happy with recently announced “Interest Relief Restriction” ’ – The UK has 327,000 numerate individuals who could be doing something useful to improve life but instead, have chosen to spend their working lives working out other peoples tax liabilities and advising on how to reduce them. You bet they are happy. If we had a simple tax code – flat rate / everyone pays, there would be no need for accountants and no irate special interest groups like this one. And you say I am not a professional? True I am not a practising tax lawyer for example but where did I suggest that I was giving professional advice – I merely stated the majority view of the leadership of the PDPLA as best as I was able, and every page of our website contains the phrase “Written and oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information and advice nor shall the Association be held responsible for the consequences of reliance upon such information.”

Monty Bodkin: You assume I will not be badly affected. Depends on how you define badly – I suspect I will be paying £5-10K more tax than I do now. Agree most of us operated like sole traders under the old tax regime, now we have to change or pay more tax.

Mark Alexander: I did link to the petition and I don’t presume everyone of my members will agree with the view stated, that was why we included the link so that those who wish to do so, can sign it. My point, which I obviously failed to convey, was that however much these changes may hurt individual landlords, we don’t have a cat in hells chance of changing it. I’d love for you guys to prove me wrong – but after a career which included a number of years leading the team responsible for ‘influencing the influencers’ (lobbying to you and me) at a global corporation, I can generally see which battles are winnable.

I will happily produce an update / follow on piece for my members and will include a link to the spreadsheet, so each can see how they will be affected. Would you care to draft something?

Jim S: Sorry to hear it affects you so badly, but I think the chancellor would ask why a portfolio of that size is not operated within a corporate vehicle rather than as a personal one. (And I do know how much that change will cost many people).

John McKay: I never said the tax change was fair – no tax change ever is. The point I was trying to make was that to everyone who is not a landlord, it makes a great deal of sense. The housing market has been distorted by so many things over the past 30 years and is now so overpriced compared to the long term norm, things need to be done. The sensible thing would be an extra 500,000 houses a year for the next 20 years but that is hard, so instead they tweak and BTL is an easy tweak which pleases many people and takes one of the drivers out of the market and also raises some tax revenues.

Reply to the comment left by "Dr Monty Drawbridge " at "01/08/2015 - 10:36":

Hi Monty

If you go to http://www.ion.icaew.com/TaxFaculty/post/Taxation-of-dividends

and click on the link to “New dividend regime – paper by Rebecca Benneyworth.docx.

you will get a lot of information about dividends, and a comparison of the tax position of a sole trader with that of a company.

Reply to the comment left by "Mark Alexander" at "01/08/2015 - 12:00":

Bravo Mark! You have raised some handsome vowels.

Reply to the comment left by "Martin Silman" at "01/08/2015 - 14:17":

Hi Martin

May I respectfully suggest that you and the rest of your committee use the spreadsheet to work out the impact on your finances exactly. A guestimate of £5k to £10k is a very wide range. You may be pleasantly surprised at how much extra tax you will be paying, more likely you will not.

For most landlords who have taken advice over the last 20+ years as to whether it is better to operate as individuals or through a corporate structure the advice would have been to avoid incorporation. That advice might well be different going forwards ....... BUT ...... changing a strategy at this stage is not a viable option for the majority due to CGT, SDLT, ERC's and refinancing costs.

I am not going to suggest the wording of a follow up article unless you completely revise the existing one which will be perceived offensive to most landlords, tenants and homeowners who face negative equity, upheavel and possibly bankruptcy/homelessness if this ridiculous Budget proposal is implemented.

The government believe that 1 in 5 landlords will be affected. Are you aware of the Pareto principle, AKA the 80/20 rule? Based on this principle it is likely that the 20% of landlords affected will own 80% of the property in the PRS. If this 20% of the landlords in your area exit the market as a result of a planned strategy or due to insolvency that means that 80% of tenants in your area will also be evicted. What will happen to property values in your area if that many properties hit the market in a short period of time? What percentage of those evicted tenants will be in a realistic position to buy? Where will the rest of them live, especially given that all other areas will have a similar problem?

Do you see now why we have to stop this madness?

It's not just 20% of landlords that will pay the price of this badly thought our Budget proposal, it is much bigger than that.

If property values do crash where will that leave your exit strategy? Will you have enough remaining equity to pay of your mortgage and the costs of selling, including CGT if/when you need to do so?

How many homeowners do you know who could also be trapped in negative equity?

Do you care about how many tenants are evicted and possibly left homeless?
.

My latest tweet ....

Do you care about #tenants evictions #homelessness when #landlords sell up or become insolvent? If so, sign this https://t.co/YK2Dixwo7d

— Mark Alexander (@iAmALandlord) August 1, 2015

Reply to the comment left by "Mark Alexander" at "01/08/2015 - 14:52":

Bravo Mark, bravo.

Reply to the comment left by "Martin Silman" at "01/08/2015 - 14:17":

Martin,

Does this represent the majority view of the PDPLA leadership, including your chairman Martyn Winfield ?

I would be surprised if it did.

I would be even more surprised if it represented the views of your 170 members.

It seems more like this is your own personal opinion without having given it much thought.

Unfortunately this will inevitably be portrayed as changes "supported by landlord groups such as the PDPLA".

I suggest you consult the rest of your leadership and issue a statement that reflects the real view of your members.

Reply to the comment left by "Martin Silman" at "01/08/2015 - 14:19":

Martin I did not say that you did say it was fair. I said you just don't get it, and it appears you still don't.

I'm talking about the consequences of this move by the Chancellor. I think Mark is completely right but let's take a more cautious approach for a minute.....

I've gone through this sum so many times now that I really should just cut and paste it. If 1 in 5 of the 2 million British landlords are affected that's 400,000. If they each only dispose of 2 properties then that's 800,000 evictions. If each tenant is a family of 3 then it's 2.4 million people looking for a home in a shrinking market. This is crazy, why can you not see it?

Look I don't know what your organisational aims are but surely it's acting in the best interests of landlords and tenants? If not then what an earth are they and how do they fit in to this picture?