Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ros ." at "09/08/2015 - 22:41":

Hi Ros

My estimate is 4 million affected tenants, i.e. 80% of PRS tenants.

20% of landlords will own 80% of the PRS property. It is this 20% of landlords who will be affected. We already know the larger landlords tend to have larger debt.

Look at the Pareto principle, also known as the 80/20 rule >>> https://en.wikipedia.org/wiki/Pareto_principle
.

Reply to the comment left by "Ros ." at "09/08/2015 - 21:59":

Hi Ros
There is nothing defeatist in my line of reasoning.
I admire your optimism and the effort you and others (including me) are putting into this.
I also use to be an eternal optimist until the vicissitudes of life taught me to consider 'pragmatism' in the correct situation. Whether we like it or not, realise it or not, deserve it or not, landlords are a despised group and the chancellor will see the dismal response to this petition as confirmation of his political sagacity (master stroke). The MPs will not raise a voice as they would not want to be seen associating with Landlords, despite the many of them that are landlords themselves. Mind you, if we all had a 10% raise in our take home pay, we would be able to absorb some of the levy like them. The lesson for me and the conclusion I have reached is that I need to radically re-structure. The business model has to change and this will impact some of the groups that are sitting on their hands watching the spectre with glee. Re-structuring is the only measure that is firmly under my own control. However, this is not to foreclose on your continued support and effort. Aluta continua.

Reply to the comment left by "Mark Alexander" at "09/08/2015 - 22:46":

Hi Mark.
I still would like it if someone could come to that figure in a detailed way and one which we can defend.
I'm sure the figures must be out there; I'd just like someone else to look for them (not you and not me). As GO reckons he wants the RLA to give him details of their research into 'impacts,' this is a critical one. I have no idea though how the RLA are approaching this issue - how they are doing the research, if they are doing a survey what they are asking and so on. Maybe they are looking into this very question. They never reply to me, so I don't know.
Just gone past the 10,000 signatures by the way. Let's see if we get a response ('the Chancellor - he say no').
The status on the petition site is that we are now 'awaiting response.'

Reply to the comment left by "G Cox" at "09/08/2015 - 22:20":

Hi Graham

The proposal is to disallow finance costs as a revenue deduction. There has been no mention of converting them into a capital loss, which would be even more revolutionary.

Reply to the comment left by "Ros ." at "09/08/2015 - 23:11":

Hi Ros

For what its worth I emailed the CML earlier to ask them for the figures on the number of BTL mortgages held in the UK plus if possible the number of individuals the mortgages are held by.

They might not tell me and maybe the figures are already out there anyway but if not it's worth a try?

Reply to the comment left by "Mark Alexander" at "09/08/2015 - 22:39":

32p in the £ calculation is easy to figure out.
As soon as you are a higher rate tax payer you will be allowed 20p in the pound relief on every pound spent on interest.
That means that 80p in the pound is then taxable at the rate of 40%
That means that you will be taxed at 40% of 80p which is 32 pence in the pound.

The figure doesn't need to be to seven decimal places, you just need to know what to tell your tenants.

That will be their rent rise, before higher interest rates start to make it worse.

So rent increases of 32% are now on there way.

Reply to the comment left by "Mark Alexander" at "09/08/2015 - 22:39":

You mean Gary , Mark. I can't help on Gary's 32%, but let me suggest a principle bottom line for the campaign that has the most hope of success.

I think there is only one complaint against which the Chancellor can have no reasonable comeback: political, financial or economic.

THE BOTTOM LINE FAULT. Standard rate payers are forced by the Treasury’s strange new calculation method into the higher rate income tax bracket, despite not claiming higher rate tax relief on interest costs and despite the Chancellor's statements that only higher rate tax payers would be affected.

THE REASON. The net profit of BTL is to be defined for the purposes of calculating / assessing ‘taxable income’ to exclude all interest payments of all BTL investors and is so proposed by the Treasury despite the Chancellor not outlawing interest costs deductibility.

THE SOLUTION.
1) calculate net profits to exclude all interest payments in the normal way,
2) calculate tax in the normal way and then
3) add extra tax to the tax bill of higher rate BTL tax payers equal to
a) 20% ( ie 40%-20%) of the total of interest costs deducted OR
b) 20% of the part of interest costs deducted equal to the person’s taxable income over the 40% threshold.

This would achieve exactly what the Chancellor said he wished to achieve without damaging standard rate tax payers and in a way that is less difficult to understand and that is rational .

There can be other bottom lines to go for, but they will not be ones against which the Chancellor can have ‘no reasonable comeback: political, financial or economic’ in my view. For example:

BOTTOM LINE FAULT 2. Removing the tax deductibility of the BTL interest payments higher rate tax payers.

I think this has no chance of reversing, but maybe a £ maximum interest cost deductibility at the higher rate might have a hope.

Reply to the comment left by "Gary Dully" at "10/08/2015 - 01:12":

Sorry Gary, you've got that wrong, a double accounting error.

Your 40% tax should be applied to the whole £1 (I.e. 40 pence) then deduct 20% tax relief from the whole pound you spent of interest (I.e. 20 pence).

If you want to get that 20 pence back you need to charge more than 20 pence extra rent because that will also be taxed at 40%.

On that basis, you will need to charge an extra 28 pence of rent for every £1 of finance cost in order to end up with what you already have today.
.

Reply to the comment left by "Anne Nixon" at "10/08/2015 - 00:13":

Hi Anne. That's great. Let us know if you get an answer. I am sending my letter to the Council this morning, and thanks to your idea, I will now also ask them some similar questions to try and get a more accurate picture. Thanks.

RLA has just published this article in its daily newsletter (I haven't checked out the page yet):

The Residential Landlords Association (RLA) has launched a new campaign page full of tools to enable landlords to lobby against the proposed tax changes announced by George Osborne in this year’s summer budget.

These measures included reducing the mortgage interest relief for buy-to-let landlords to the basic rate (20%) and replacement for the wear and tear allowance for fully furnished properties with a scheme for tax relief only for actual replacement furnishing.

The page (http://www.rla.org.uk/landlord/lobbying/tax/index.shtml) lays out ways in which landlords can campaign against the measures along with the RLA by contacting their local MP and signing a petition on the Parliament website.

The site also takes you to the RLA’s tax calculator created by the RLA and Rita4Rent where you can work out exactly how the proposed mortgage interest relief changes could affect your income.

The RLA has meetings set up with the Treasury and is looking at putting together a proposal of alternative tax proposals to Number 11 on both mortgage interest relief and wear and tear.