Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Barry Fitzpatrick" at "04/08/2015 - 10:55":

Actually, it could be a part of a general attack on sole traders. Ltd co can get out of paying 2000 (soon to be 3000) NI on its employees, but sole traders can't.

You're right Mark I have missed the point. Dismiss my comments as the rantings of an old landlord who feels his obligations to those he provides homes for are at least equal to his obligations to himself. You hadn't planned for this tax - well there will be more changes coming - but I won't list them. No-one here is listening anyway.

More generally, James Tallis acknowledges points well...many others on here just think other views are from people who 'do not get it'. Dismissing contra views will be the undoing of what is actual a reasonable petition

The only reason I wanted to contribute was because the initial thread was really useful to help me understand the potential implications of the change.

Then it moved to phase 2 - that this was a discriminatory change and unfair attack on the human rights of landlords. Likened to the plight if he Jews. A terrible comparison with which I have second hand family experience. And more shameful I could find no comment from others on the forum suggesting it might be a bit inappropriate.

The phase 3 the 'its bad for tenants too...I am only helping them' 'the petition' 'lets raise rents' and any another contra view dismissed.

If you are paying large amounts of interest with no repayment plan - that was, always was, a massive risk. Expect goalpost to move at any time. Housing is political. Housing is a basic provision and subject to wild swings of regulation, tax and politics. Buyer beware.

I protect myself by buying very cheap then adding value and repaying my mortgages. And I make money each month.

Other sole trader businesses do not leverage using interest only loans. What the long term plan if house prices remain level? In business always have your eye on the exit door.

Being a LL is a business but the finance model being advocated and defended is not used in other businesses. So expect it to be treated differently. It is not a right to insist on how we are taxed. Influence it - sure, but stop suggesting it is a moral outrage or a divine right.

So be clear what you do not like about this change and stick with it. The victimisation of LLs position undermines any argument completely.

The petition has been a super effort. The concept is simple. The tax change feels inconsistent, draw that out and highlight examples. The couple of examples used were where a LL pays tax on a 'loss' and another showing how it impact a BRT were enough. Simple and logical.

However, the tone of aggression and victim hood on this forum is something I would not want to be a part of. Keep the tone balanced or you will lose the support of the cash wealthy LLs or corporates who, will be happy to pick up stock from motivated sellers.

Thanks for the initial and informative thread and good luck with the petition.

But sorry guys......you lost my support at the holocaust comparison.

Reply to the comment left by "Michael Barnes" at "03/08/2015 - 22:46":

@ Michael
I totally agree with you. this is what is in the "All you need to know PDF that is being circulated. Here's the paragraph:

"The Government proposes to break this normal taxation practice and require
landlords to pay tax on part of their costs. By the year 2021, it will still be possible to
get a deduction for finance interest, but the amount will be capped at 20%. This is a
big change because in most cases, finance costs will be the landlord’s largest cost.
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."

I would prefer something like:
"The Government proposes to break this taxation principle by not allowing finance costs (i.e. mortgage interest) to be treated fully as a business expense. By the year 2021, it will still be possible to get a tax deduction for finance costs, but the amount will be capped at 20% of those costs. This is a big change because for many Landlords, finance costs will be their largest cost. No other business is taxed in this way. No other business is prohibited from claiming, as a business expense, interest on loans taken out to buy assets that generate taxable income.

We believe that individual landlords who provide valuable housing across the UK are being unfairly discriminated against by the Government."

I haven't checked the rest of the document for other references.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "04/08/2015 - 07:43":

I have just sent an email to the National Union of Students....

Reply to the comment left by "adam prospect" at "04/08/2015 - 12:17":

I too have second hand family experience of the holocaust, and I was not offended by the original remark.

I only respond emotionally to comments on this thread when I feel personally attacked, as I did by your previous post.

I do believe that the current petition is not inflammatory, and that the point that no other business is taxed in this way is relevant.

The Scottish Association of Landlords has today sent a survey to its members. Here are the questions being asked:

In his recent summer budget, the chancellor announced changes to mortgage interest tax relief. Currently, individual landlords can deduct their costs, including mortgage interest, from their profits before they pay tax. Landlords with higher incomes (from property rental or employment or other sources) receive tax relief at 40% and 45%. This tax relief will be restricted to 20% for mortgage interest by April 2020. This survey is designed to gauge the likely impact of this on our members, their tenants and the supply of private rented properties in Scotland.

1. How many rental properties do you have in Scotland?

2. Do you have mortgages on any of your rental properties?
Yes
No

3. Are any of your rental properties owned by a company (as opposed to by individuals)?
Yes - all of them
Yes - some of them
No

4. What is the highest rate of UK income tax you pay (based on your last tax return)?
Basic rate (20%)
Higher rate (40%)
Additional rate (45%)
None

5. How many of your rental properties do you have a mortgage on?

6. Are the mortgages on your rental properties interest only or capital repayment and interest?

Interest only
Capital repayment and interest
both types of mortgage

7. How much more tax will you pay per year in 2020 as a result of the changes to mortgage interest tax relief?
Don't know
Amount of tax in pounds (£)

8. Do you consider that your rental business will be viable once the mortgage interest relief changes are introduced?
Yes - it will be viable
No - it will not be viable
Don't know

9. Will you sell any properties because of the changes to mortgage interest tax relief?
Yes
No
Don't know

10. How many properties will you sell?

11. Will you increase the monthly rent on any properties because of the changes to mortgage interest tax relief?
Yes
No
Don't know

12. On how many of your properties will you increase the rent?

13. How much will you increase the monthly rent by? Please state percentage increase (if you plan to increase rents on multiple properties please enter the expected average increase)

14. Will the changes to mortgage interest tax relief lead you to do any of the following?
Transfer ownership of properties to another family member who pays less/no tax
Set up a company to own the properties to avoid income tax
Change approach to investment on maintenance/repair/improvements
Pay off mortgages early
Pay down mortgages to reduce amount owed
Do holiday lets instead

15. Before the changes to mortgage interest tax relief were announced, were you considering investing in more rental properties in Scotland?
Yes
No

16. Are you less likely to invest in more rental properties as a result of the changes to mortgage interest tax relief?
Yes
No
Unsure

Reply to the comment left by "Jim S" at "03/08/2015 - 23:35":

It also occurred to me today as I waited for my plumber at a property which i have been at for 2 hours "not undertaking activities that constitute running and working in a business" .....

I saw two homeowners in one street using decorator and gardener (two different owners two different Polish people) and the homeowners paid the polish workers cash. Worse still and these tow guys had PL registered cars, that they were using for their cash business so no income tax not vat tax and no road tax either - Rodney!

Gosh! homeowners are so hard dome by because of BTL this playing field is so uneven...

Add to your list:
homeowners can and do get work done for cash as no one is checking
homeowners fuel the black market
homeowners don't need to pay VAT if they "how much for cash mate" the task to a cash worker

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "04/08/2015 - 13:45":

It would have been good if there had been a link to the calculator for Question 7.

Note article with comments from Jeremy Corbyn on the private rented sector.

https://redbrickblog.wordpress.com/

Has anyone contacted Red Brick?

Reply to the comment left by "adam prospect" at "03/08/2015 - 22:10":

Adam its good point you make and you are a good man. "Many like me have deep pockets of cash"

You are financially sound and I applaud you for it. I also believe philanthropy should be the first sport of those with deep pockets of cash. Philanthropy is a gift in your control that regrettably is not in mine and many others. I would think you mean if you did not take the approach you do, and do not actively look for those less well of them you to give a hand up / hand out to. Bravo... Bravo! I mean it!

However..... we are in the growth phase of our business, still working 15 hours a day not sleeping and do not have the the trousers let alone the pockets into which to put our cash which we also do not have. Doubtless you earned (or think you earned) your piles of cash. You actually only got it because the rest of us are here too and pushed market prices up so you could capitalise. In truth you are the right side of lucky - thats all. Please don't think you should or could burn the bridge once you are across it - plenty of us are still waiting and working for the golden goose to visit is like it has you. Rents don't have to go up but they will and I unlike you will pass on the costs because I have to. - not because I am a mean, sour, dejected, discriminated against LL.

Putting rents up is not an argument or a threat or a tone or a slogan or a throwaway it is a mathematical and economic certainty. We should NOT be careful of tone and we should, shout LOUDLY "RENTS WILL HAVE TO GO UP SIGNIFICANTLY" it is like watching someone standing on a sea-wall when you know there has been an earthquake 50 mile off the coast - you know what is coming right? Perhaps we don't tell the old person in the wheelchair as they'll never make it to safety anyway and after all why worry them? I think a tsunami warning system is a jolly good idea!

On a side note: I and I suspect many others here are looking for cash rich LL's or investor to buy my business. I have no scruples in that and will sell to the highest bidder. Don't circle Adam - Land!

Tenants are wonderful people and I only let to people I like so I count many as great aquatics and some as friends/ However they take the risk like we all do. Every contract from every good landlord says "if I sell" - you will "rent increases can happen like this" Tenants know the risk and whilst I'll fight the relief restriction proposal & I do feel for my tenants many are better off than me and most have tome to financially recover a disaster and as a population they can better carry the spread increase in cost than I can.