Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Jireh Homes" at "07/08/2015 - 21:57":

Jireh: my scots wife spent much of her childhood in Aberdeen. The market is not dissimilar to the SE of England in many ways, so the city council there should be concerned as the budget proposals as all London councils also should be.

As others have rightly commented we should not focus the campaign on whining. George and crew are unlikely to care two hoots about that, but this budget proposal appears to target & impact the business models of the middle ground in popular locations which I KNOW includes some of the most professional focussed suppliers amongst those involved,

The ones who would 'get away with it' seems to primarily include big business/ call centre type operations (poss Tory party sponsors) and at the other end of the scale - accidental landlords.

Speaking from personal experience the most useful & focussed providers of rental accommodation in locations that are in demand yet relatively low yielding may be the focus of this LOL (Levy On private Landlords) or LOT (indirect Levy On Tenants)

Politically none of the above matters to the nation if it gets the right result in the end. But it won't. Just about short term cash for the Treasury and more careless & carefree institutional and overseas wealthy investors?

Better debate these last few day - thx.

The retorts I won't respond to but it's your site Mark so re your question:
30% or 50% PSR. I get that works in some other countries - so the position I am looking at is....something where any hardworking family or public servant can buy their own home. That is a dream for many in the UK - even if this is a personal cost to me.

My scenario with 2m BTL'ers buying 10 houses each meant 90% of homes were held by 2%. Politically unacceptable although it worked in the 1850's but so did work houses :). See almost a funny from me.

The chap who suggested I could buy his houses. Yep, interested but I never buy whilst someone believes they have any other choice other than to sell to me.....so we can park that transaction for now. I do feel an obligation to tenants but that does not extend to sellers.

Keep on with the genuine good efforts with the petition.

Gibraltar
I am looking at leaving the country and would like any advice. I am considering Gibraltar.
Has does anyone done it or considering it?
I read the Tax Cafe book which was helpful.
Any accountants that can advise on this as it seems my best option now.

Reply to the comment left by "KATHY MILLER" at "07/08/2015 - 20:33":

Hi Kathy.
We're getting an awful lot of this underplaying the consequences - the misleading statement by GO has blinded the majority of people - landlords, letting agents, accountants etc - into thinking it's a different policy entirely to what it is. My response in these situations is to send a polite email back explaining how many people have misunderstood it because of the way it was presented, but that, using HMRC's own examples we can prove that it is going to have a massive effect and I give them the link to the page

http://www.property118.com/restricting-finance-cost-relief-for-individual-landlords-petition/76936/

and also to this example:

http://www.property118.com/what-is-aunt-sally-going-to-do-now/77263/

That seems to work!

Reply to the comment left by "Ros ." at "08/08/2015 - 07:48":

Hi Ros

Yes I did reply and sent the links so hopefully they will read them

9522 @ 08.52 a,m this morning. Lets get the first target of 10k by the end of evening.

I have just drafted an email to the Bank of England, but don't want to say the wrong thing, so am putting it here for comments before I send it. Constructive comments welcomed.

'Dear Jasbinder.
Thank you very much for your personal responses to both my emails and those of my colleague at Property118. We appreciate it. I now would like to raise a few more points.

I note that the Governor is worried about 'household debt' and am concerned that BTL mortgages are not defined by him as such, as they are secured against income-producing (and tax-raising) property and as such are currently assets (the new 'tax relief' policy, if it goes ahead, will turn many properties into liabilities however). We are concerned that the Bank of England not take the strange view of the Chancellor that landlords should be compared to owner-occupiers and also not accept the false statement that landlords face an unfair tax advantage, when this has been thoroughly refuted by the independent economists which advise the Treasury.

We would suggest rather that as private landlords operate in exactly the same way as limited companies (although I believe private landlords often have larger portfolios and are therefore bigger businesses than many incorporated businesses), that this is the correct comparator. We should be treated the same; there is no logic in suggesting otherwise.

I do not understand the dynamics and relationship between the Treasury and the Bank of England, but from what I can infer, it would appear that the Bank of England does not agree with the Budget proposal. I would, therefore, like to know if this is likely to be stated publicly. We are in desperate need of a voice of reason on this.

To go back to the subject of 'household debt,' speaking for myself, I have a 40% mortgage on my family home (60% equity) and no personal loans whatsoever. The only 'debt' I have is in my business (overall LTV of 75% across my portfolio). This is a sustainable business model which will become unviable with the restriction on 'tax relief.' With each interest rise, and as we know they will be commencing soon, my model becomes less sustainable; not because of the interest rate rises per se, as I have sufficient savings to cope with those. The problem is the idea that I will be taxed on a non-existent profit.

We really are coming under siege now, as a group, with Labour candidates also joining in with the landlord-bashing and the media is also generally hostile towards us, despite us providing an essential housing service to many millions of tenants throughout the country; many of whom are not in a position and/or do not have the inclination to buy. We often provide housing in poorer areas which large corporations would not wish to enter!

The points made by those hostile towards us are politically-motivated and not based on sound economics or an accurate assessment of the social repercussions. We are hoping that the your colleagues at the Bank of England can offer a counterbalance and serve as a dispassionate and impartial adviser and help to devise and put forward alternative solutions to the housing issues facing the country. Driving landlords out of business through a punitive and nonsensical tax regime singling out only private landlords will contribute nothing positive to the economy, but rather, adversely affect many people and also impact on the 'data' upon which Mark Carney bases his decisions.

As I mentioned, other policies are constantly emerging with the aim of controlling and regulating private landlords - politicians seem to see this as a vote-winner. In fact, there are already hundreds of pieces of legislation in force, but perhaps not enforced. Ministry of Justice figures just released show that over an 8-year period between 2006 and 2014, councils prosecuted 2,006 landlords and property companies. According to figures released earlier this year by HM Revenue & Customs (HMRC), England and Wales has around 1.6 million landlords. As a rough calculation 2,006 as a percentage of all landlords is a number that hardly registers on the scale – lower than 0.1%. But there is only one explanation behind the tax relief decision, and it is that there is a perception that landlords somehow deserve to be singled-out and punished.

In terms of the economy as a whole, we believe this decision will create massive uncertainty and worry for the whole of the private rented sector; landlords and tenants, alike. Mr Carney has to ask: is this good for the economy? The answer is 'no.' It will be a mistake on many fronts.

I must add that I am also a bit worried that there may be a conflict of interest. We are aware that the Chancellor intends to support large corporations investing in private letting, at the same time as driving current landlords into bankruptcy.

We really need a powerful voice of sanity out there. Economists, including the Directors at the IFS, iea, and also an expert in taxation, Professor Devereux at Oxford University have all spoken out against the measure but do not seem to have any power, unfortunately.

It is for this reason that I am hoping you can pass these messages on so that they may have some effect in the reversal of this decision.

Yours sincerely'

Reply to the comment left by "Ros ." at "08/08/2015 - 09:02":

Hi Ros

This is another excellent piece of work from you. Well done!

However, it is not clear what you mean by the sentence:

“I note that the Governor is worried about ‘household debt’ and am concerned that BTL mortgages are not defined by him as such, as they are secured against income-producing (and tax-raising) property”

It could be read to mean that you want him to include BTL mortgages in household debt, or alternatively that you don’t know but hope he doesn’t.

I would suggest “(and tax-yielding)”.

Instead of “may have some effect in the reversal of this decision.” I would suggest something like ““will help to get the proposed change cancelled.”

Reply to the comment left by "Ros ." at "08/08/2015 - 09:02":

The BOE website states:

"Founded in 1694, the Bank of England is the central bank of the United Kingdom. Sometimes known as the ‘Old Lady’ of Threadneedle Street, the Bank’s mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability."

I would major on the negative economic stability such changes will bring about and that they have a duty of care in this respect.

I have just seen an advertisement for the landlords and lettings show, Now I have never had the time to get to one so I don't know how well attended they are, however this would be a great place to push more awareness of what the budget will do the the residential lettings industry and the residential built environment as a whole. If anyone has connection with the organizers it would be useful if the show organizers could arrange a prominent location within the show to enable lettings businesses and those with a stake to sign the petition and push the numbers closer to the 100000+ which is the point the government will start to take notice and realise we are voters too.

Just on another point, there seems to be little in the news outside of the construction industry as to what is really driving up house prices instead of pointing the finger directly at the buy to let sector.
- Mostly the rising cost of construction and repairs. Much of this due to tighter building regulations compliance, particularly energy conservation where suppliers of energy saving products such as insulation, have put their prices up due to the forced higher demand. (Oh, there is that ugly word again, Demand)
- Shortage of building materials constraining production of new dwellings. Therefore developers are having to charge more to keep their margins.
- Shortage of trades due to many having fallen away from the industry at the beginning of the downturn. (Try to get a good brick layer or plaster today, you will be waiting weeks if not months) Decent trades are charging far more than they were 12months ago due to, dare I say it DEMAND. Rubbish tradespeople are available, but then you will need a good one to put the work right.
- The first time buyers scheme and low interest rates have pushed up the cost of starter homes.
- Real wages haven't grown in years to keep up with rising costs so there is the perception that greedy buy-to-let businesses and construction companies are trying to keep first time buyers out of the market.