Summer Budget 2015 – Landlords Reactions

" A sledgehammer is not a requirement for cracking a nut. Limiting new BTL debt to lower gearing and higher interest cover gradually would do the trick, without putting the economy into reverse"

The restriction on personal mortgage MMR etc, has done this for the owner occupier's. This is also one of reason that people who do not qualify are buying a Buy to let and raising a BTL mortgage, whilst living with their parents with view to hedge against future growth & once their circumstances change they can switch from buy to let to personal mortgage

Reply to the comment left by "ray selley" at "05/08/2015 - 20:16":

It'll cost less than that per home, I should think, as it will be blocks of flats and small terraces. Not the family homes with gardens that my per-owning tenants want.

Reply to the comment left by "ray selley" at "05/08/2015 - 20:16":

It'll cost less than that per home, I should think, as it will be blocks of flats and small terraces. Not the family homes with gardens that my pet-owning tenants want.

Reply to the comment left by "Connie Cheuk" at "06/08/2015 - 08:49":

Hi Connie,
Yes, I would have to pay CGT. And bearing mind I purchased most of the property between 1998 and 2003, and all were redevelopment projects, it would be a very lot of CGT!

Reply to the comment left by "Ros ." at "06/08/2015 - 09:45":

Ros the Philip Booth article is helpful. I noticed a number of other bloggers on economic policy listed on the bottom right of the page - see Blogroll.

http://www.iea.org.uk/blog/the-green-interview-%E2%80%93-failed-on-style-what-about-the-substance

I have made contact with the Adam Smith Institute to find out their take on the tax change.

Can others on the Forum contact some of the other bloggers.

Reply to the comment left by "Ros ." at "06/08/2015 - 09:45":

Hi Ros

Thanks for posting a link to Philip Booth’s blog,. This is an excellent piece, which he illustrated with a picture of Marx.

So George got this idea directly from the manifesto of the massive Green Party. I always thought that theirs was a very apt name.

Philip’s predictions were:

“Houses for let will be sold and we will see a decline of the rental market again. Here, there will be no gain to the Exchequer because owner-occupied property is not taxed at all (indeed, there will be a loss to the Exchequer).

Rents will rise to restore the investors’ return on equity – in this case by nearly 15 per cent.”

In his example he calculated all tax at the basic rate of 20%. Maybe his prediction of a 15% increase would be higher if he had factored in the higher rate band.

The comment made about the Greens below the blog in February is scathing:

“Surely the real point is that parties that are never likely to achieve power find it very easy to propose policies that some people might find superficially attractive, but which fall apart on closer examination. As they know they're not going to win most people’s votes and will never be held to account, they only have to appeal to those who won't examine these policies in detail. Indeed, they probably attract the sort of people as members (and policymakers) who propose policies without thinking them through.”

I wonder if anyone in George’s party has thought it through.

New Slogan

Budget measure on landlord taxation will put private rented sector into reverse and harm economy

https://petition.parliament.uk/petitions/104880

Is there merit in writing to the individuals who make up the Bank of England Monetary Policy Committee?

http://www.bankofengland.co.uk/monetarypolicy/Pages/overview.aspx

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "06/08/2015 - 10:24":

This article absolutley hits the nail on the head

"Private landlords generally take out loans, add some of their own equity capital, buy houses and let them out – that is how any small business works. They receive income (rent) and they deduct costs (wear and tear, alterations, depreciation and the interest on the loans they take out). On income less costs they pay tax (corporation tax if they incorporate; income tax if they do not). Being able to deduct interest from the rental income is not a “relief”, it is recognition of a cost of doing business. The landlord is providing some capital (the equity) and paying tax on the returns on that capital; the bank is providing the rest of the capital (funded by issuing securities or taking deposits) and the interest earned by those who provide the bank with the funding will be subject to tax. This is absolutely the correct way to tax returns for buy-to-let landlords, though believing that the tax deductibility of interest is a “concession” is an easy mistake to make – George Osborne flirted with abolishing it for corporations before the 2010 general election.
Consider a buy-to-let landlord with £1m worth of properties in Leicester which yield rents of £70,000. Assume they are financed by an 80 per cent loan at 5 per cent interest (total interest of £40,000) and there are other costs of £10,000. Let’s say the tax rate is 20 per cent. The landlord’s profit is £20,000 on which he would pay £4,000 in tax leaving a net profit of £16,000. Now assume that the landlord cannot deduct interest from his income before tax. The taxable profit would be £60,000 and tax £12,000. After tax and interest the landlord will be left with £70,000 less £10,000 other costs, less £40,000 interest less £12,000 tax: in other words £8,000. The effective tax rate on the landlord’s profit will be 60 per cent. "

There may be an argument to call the Chancellor out on the "stability" angle too.

How does taking a property from (typically) 75% LTV as a BTL to 90% LTV (plus the future burden of Help to Buy) as a FTB assist with making the housing market more robust?

The latter is far more exposed to a small correction.