Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ros ." at "03/08/2015 - 13:43":

Ros,

That's great work.

I have emailed both the Gateshead Council and Newcastle Council run Private Sector forums with details about the campaign we are running and with links to the site, the petition and all the spreadsheets.
Both Councils have agreed to pass these details and links on to all the Landlords on their databases.
Good on them 🙂

Our campaign must be fought on many levels. I see the petition as a very important tool, and also lobbying MPs (there will be a thread published soon, where I will be asking everyone to let me know which MPs they have contacted, whether they have had a response etc. - so keep writing to MPs!); I see another priority as writing to possibly influential allies/people who have shown they agree with our viewpoint. This can be economists, academics, people on the Treasury Select Committee, journalists and so on. With this in mind, I just wrote to the Professor mentioned yesterday, the following:

Dear Professor Devereux

I write with regard to the article in the Mail where you are quoted as saying: “If you are trying to tax profit you have to give relief for the cost of earning it.”

As a landlord who has been stunned by the Chancellor's Budget proposal to restrict 'tax relief' for landlords, I am hoping you might have some useful advice for us, or could even provide us with a few arguments we could use in our campaign to get this proposal reversed. The fact that our mortgage interest is also now going to be re-defined as 'income' which can be taxed is going to put some of us into a situation where we could be taxed on a zero income (or even a loss), as our 'actual income' will be deemed irrelevant. With each interest rise we will be defined as earning even more, as our actual income diminishes. For some of us this is going to be catastrophic.

I have written to the IFS, whose Director said the decision was 'plain wrong,' and that of course the costs of running a business must be offsettable and I wrote to Professor Philip Booth, economist - as he, also gave evidence to the Treasury Select Committee on the Budget, and said the decision 'didn't make sense.' However, the Chancellor has shown no signs of withdrawing it yet. As landlords, we believe it is grossly unfair, illogical and discriminatory. Perhaps other arguments will carry more weight however, in terms of its likely impact on the wider economy.

The Government issued some figures regarding amounts they expected to raise for HMRC from this measure. I wonder if you could take a look at these and do some calculations for us which we could use to counter these figures?

According to the HMRC policy paper published on 8 July 2015, the measure is expected to raise £225M in 2018/19, £415M in 2019/2020 and £665M in 2020/21.

I have no expertise in taxation, but I assume the tax implications will be far more complex than that as many portfolio landlords go bankrupt when they are required to pay massive amounts of tax on fictitious income. As a large amount of tax is raised from rental income and the sold/repossessed properties might be removed from the rental sector as a consequence, surely the lost taxation from rental income would counterbalance the above figures? I hope you can express these and other effects of the measure more accurately for me though, as an expert in the field.

Please let me know if you are able to assist at all.

Reply to the comment left by "Stewart Jackson" at "03/08/2015 - 14:30":

Well done Stewart. That sounds like a very large area covered.

Reply to the comment left by "Ros ." at "03/08/2015 - 14:32":

I support everything you are trying to do - however, you will shoot yourself in the foot if you continue to argue that you are being taxed on fictitious income.

Mad George has decided to tax us on our ACTUAL income (ie the money that comes in from our tenants), He will then give a tax credit (at 20%) on the 'finance costs' that we have actually incurred.
This is NOT taxing us on the mortgage interest.
It is taxing INCOME.

I know that this is significantly different to the current method of taxing us (using income tax bands) on rental profit.

Under the current system, 'Income Tax' is payable on BTL profit.
Under the proposed system, Income Tax will be due on Income.
(and, with we will have to pay the mortgages with what is left AFTER expenses and tax)

The proposal does NOT tax your interest payments - it does, however, remove what some would call an unfair advantage that BTL mortgagees have over residential mortgagees..

It will not help our cause to make claims which can be easily be refuted...

WS

Reply to the comment left by "Shining Wit" at "03/08/2015 - 14:47":

Hi Shining Wit.
Thanks for that. Mark has also pointed this out to me. I've got a bit of a blind spot on it, but I am endeavouring to get it straight in my head (and in my letters!). Thanks again.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "02/08/2015 - 15:22":

Responding to suggestion about making extra pension contributions to avoid this extra tax. I also mentioned this 8/7/15 17:33.

I am not an accountant either but my understanding (hope) is that higher rate tax payers doing this will in effect reduce their total taxable income.

HOWEVER it is also my understanding that pension contributions can only be made from earned income so not from BTL. So this will only work for people with a day job as well as BTLs.

But if you are 55+ you can now take out as much cash as you want from your pension. I'm not btw but I'm guessing a lot of us most effected by these changes will be.

And yes I also think accountants are going to do well out of all this additional complexity.

Reply to the comment left by "Ros ." at "03/08/2015 - 15:06":

It's a very good letter; emotive and hopefully you will receive a response soon.

The point on taxing on interest is in a way correct, as it is no longer taxing pure profit. As far as I'm concerned, the interest payments have gone, bye bye, and it is a loss, so it is no longer there, along with the other losses, fees, maintenance, gas safety bill, all losses. So to assume it is still there to tax is beyond me!

The interest has left the building - thank you very much!

EX-PAT FORUMS

I've just been alerted to a post on a Britsh ex-pat forum and it occurred to me that there will be similar forums for pretty much every Country.

If you know of any please do something similar.

This is the one I found >>> http://www.eyeonspain.com/blogs/landlordstuff/15180/urgent-if-you-rent-out-or-own-any-uk-property-read-this-now-and-sign-the-petition.aspx
.

Reply to the comment left by "Mark Alexander" at "03/08/2015 - 15:49":

I think only UK residents are allowed to sign the petition ?

Edit: I stand corrected "Only British citizens or UK residents have the right to sign "