Summer Budget 2015 – Landlords Reactions

Summer Budget 2015 – Landlords Reactions

14:00 PM, 8th July 2015, About 9 years ago 9619

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Budget 2015 - Landlords Reactions

The concern is;

Budget proposals to “restrict finance cost relief to individual landlords”Summer Budget 2015 - Landlords Reactions

To calculate the impact of this policy on your personal finances download this software


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0:55 AM, 11th July 2015, About 9 years ago

Reply to the comment left by "Gary Nock" at "11/07/2015 - 00:29":

No Gary i am not !

Rental income for the year = £10,000
Mortgage payments (interest only) for the year = £5000

-----------------------------------------

Current system

income - interest = profit
10,000 - 5000 = 5000

profit taxed at your tax rate (in this example 40%), tax due = £2000

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New system of only 20% relief on interest

income - interest = profit
10,000 - 5000 = 5000

tax due on profit (at 40%) = £2000

difference between your tax rate (40%) and 20% is 20%, that amount is charged on interest

below is just a simple calculation to work out 20% of your interest
(interest / 100) * 20
(5000 / 100) * 20 = 1000

Total tax due under new system = £3000

James Leavesden

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1:05 AM, 11th July 2015, About 9 years ago

A simple way to visualise and understand how much extra tax you would have to pay as a 40% tax payer after 2021......

At the moment you get 40% relief on your morgage interest. In the future you will only get 20% relief ( ie 50% of what you were getting before)

So effectively in the future instead of claiming 100% of mortgage interest as an expense when calculating profits , you can only claim 50% of mortgage interest as an expense.

A 20% tax pay get 20% relief now and 20% in the future, so no change for a 20% taxpayer. He can continue to effectively claim 100% mortgage interest as an expense.

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1:07 AM, 11th July 2015, About 9 years ago

Reply to the comment left by "Simon Dewsberry" at "11/07/2015 - 00:55":

If you do it another way :

10k income @40% tax =£4k tax due (before decuctions)

subtract

5k interest @40% relief = 2k

means tax due £2k (on the 5k of profit).

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New system

10k income @40% tax =£4k tax due (before decuctions)

subtract

5k interest @20% relief = 1k (no longer 40/45% relief ..only 20%!)

means tax due £3k (on the 5k of profit).

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You will note that your tax bill has increased by 20% of your mort interest (1k in this case)...which is the simple way to see how you will be affected ..as i keep saying lol!!!

As most maths teachers will tell you there are several methods of arriving at he right answer!!!

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1:13 AM, 11th July 2015, About 9 years ago

Reply to the comment left by "James Leavesden" at "11/07/2015 - 01:05":

true for 40%but not 45 !!

Appalled Landlord

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1:31 AM, 11th July 2015, About 9 years ago

Reply to the comment left by "Claire Oswald" at "10/07/2015 - 19:25":

I still remember the first class on taxation that I attended in preparation for my accountancy exams. The teacher was a former tax inspector. His opening words were “If there is no income, no income tax is payable.” George Osborne has torn up this principle by imposing a levy on finance costs.

Ignoring the personal allowance, your example shows how this levy will be payable even when there is no real profit from property providing the cash to pay it.

The situation would be worse from a cash point of view if a real loss were made. And of course, this levy will increase when interest rates rise.

It is not hard to envisage that HMRC will bankrupt some people because they will not be able to pay the levy. However, as HMRC’s document reassures us, “The measure is not expected to impact on family formation, stability or breakdown.” So that’s all right then.

Phil Landlord

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5:28 AM, 11th July 2015, About 9 years ago

So as an employee I am already a HRT.
My rental profits are modest but my biggest deduction is £30k interest. Well £15k because its joint and my wife is basic rate only.
The action is I must do everything I can NOT to be a HRT.
So in my case I need to increase my pension to around 50% of my salary to bring total earnings below HRT limits - and be very very careful when selling any property.

Barry Fitzpatrick

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8:09 AM, 11th July 2015, About 9 years ago

An article in the Daily Telegraph says the IFS says that the tax raid on Landlords is "plain wrong"

http://www.telegraph.co.uk/finance/budget/11729088/George-Osbornes-Budget-tax-raid-on-landlords-is-plain-wrong-IFS-warns.html

Barry Fitzpatrick

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8:28 AM, 11th July 2015, About 9 years ago

Some other interesting observations included in this Daily Telegraph article by PwC.
http://www.telegraph.co.uk/finance/property/11731646/Buy-to-let-How-landlords-can-cut-their-shock-new-tax-bill.html

Claire Oswald

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9:15 AM, 11th July 2015, About 9 years ago

Reply to the comment left by "Appalled Landlord" at "11/07/2015 - 01:31":

Yes, he is taxing non existent profit in effect.

HMRC are saying that it's a very small proportion of landlords that will be affected, but I'm guessing someone has messed up on their research.

I agree the terminology is confusing some people. It's fairly simple really once you get your head around it.

I'm just glad I bought my last property cash. Was looking at interest only mortgages as it seems to be 'the way it's done'. It still affects me as I have finance on other properties but I could have made it worse.

And if George Osbourne thinks that phasing in over 4 years sorts out the problem, he doesn't know much about property investment.

Shakeel Ahmad

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9:32 AM, 11th July 2015, About 9 years ago

By buying cash. All your rental income minus the usual expenses ( what ever it means now ) will be added to your other income e.g salary and you do not get any amount not even the 20% as it now.

As there will be no debt against the property. The total value of the property will be subject to inheritance tax.

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