Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Barry Fitzpatrick" at "15/08/2015 - 07:38":

And Barry's wording seems sensible to me...

I was watching bits of the Budget speech last night (they seem to repeat it regularly on BBC Parliament) and I spotted 2 contradictions in just the first 10 minutes or so:
1. GO talked about introducing finance policies that were common in the G7 countries - i.e. that we should be more in step with the most advanced countries. 3 of these are Italy, Germany and France - and in a report on the PRS supplied on this site a few days ago, there was a detailed table which, apart from showing the UK taxes landlords more than nearly all of the other European countries, that no other country apart from Finland does not allow finance costs to be offset. My question then is: why is the Chancellor moving us away from this being in harmony with other countries and moving us to the Finnish model?
2. He said something like: 'no-one will pay more tax for cars they already own.' So why not the same with houses they already own?
I bet if someone could face going through the speech with a fine tooth comb they would find a mass of these contradictions. And I think they're important to highlight, as he didn't just introduce this thing with no preamble - he talked about the need for 'fairness' and 'leveling the playing field.' The Public Committee on the Finance Bill seems to want more facts and figures, but it is reasonable to highlight these contradictions and the fact that none of it makes sense.
Similarly, with the Treasury having asked the RLA for research into impact (outrageous really that they should put this responsibility on the RLA and also after the decision is announced). Also, with the idea that we are asked to produce alternatives and amendments. That is their agenda. Get us to assume it's going ahead and tweak with it. We have our own agenda, which is to throw it out of the window and get them to simply build more houses. That is the elephant in the room.

I have just received an e mail from UPAD , the on line Landlord self service letting agency distributing an article in todays newsletter basically saying it won't affect most landlords that much.

Dose anyone know James Davies the founder of UPAD as this sort of mis-information is harmful to our campaign and attempts to minimise the impact of the proposed budget changes rather than highlighting the disasterous consequences . We need him to be emailing his data base with details of the petition and not sending out blogs like this
http://blog.upad.co.uk/blog/is-buy-to-let-still-a-good-idea-after-the-budget?utm_campaign=newsletter&utm_source=hs_email&utm_medium=email&utm_content=21321388&_hsenc=p2ANqtz-8do9Fw_GfgmaTp3PYRpz8um_y3Xaoln__b8crk5P_Br8Q74mMokmuJV7rv69MdBmVKxmhgycMVykYOJ0CklaikhJEong&_hsmi=21321388

This is the link to the newsletter

http://blog.upad.co.uk/blog/is-buy-to-let-still-a-good-idea-after-the-budget?utm_campaign=newsletter&utm_source=hs_email&utm_medium=email&utm_content=21321388&_hsenc=p2ANqtz-8do9Fw_GfgmaTp3PYRpz8um_y3Xaoln__b8crk5P_Br8Q74mMokmuJV7rv69MdBmVKxmhgycMVykYOJ0CklaikhJEong&_hsmi=21321388

Here is a list of the top twenty Tories in order of smallest majority. If we could find enough Landlords in each constituency to write to the relevant MP and tell the incumbent that they'll be losing their vote next time I wonder if that would focus their attention. In the case of the top two in the list we would only need to find 68 people. I do not have list of Property118, RLA or NLA members sorted by geographic location of course but that would be a way forward. Any opinions on my thought?

Consitiuency Name Majority
Gower Byron Davies Conservative 27
Derby N Amanda Solloway Conservative 41
Croydon Central Gavin Barwell Conservative 165
Vale Of Clwyd James Davies Conservative 237
Bury N David Nuttall Conservative 378
Morley & Outwood Andrea Jenkyns Conservative 422
Plymouth Sutton Oliver Colvile Conservative 523
Thurrock Jackie Doyle-Price Conservative 536
Brighton Kemptown Simon Kirby Conservative 690
Telford Lucy Allan Conservative 730
Eastbourne Caroline Ansell Conservative 733
Dumfri Clyde & Tweed David Mundell Conservative 798
Bolton W Chris Green Conservative 801
Weaver Vale Graham Evans Conservative 806
Plymouth Moor View Johnny Mercer Conservative 1,026
Lewes Maria Caulfield Conservative 1,083
Bedford Richard Fuller Conservative 1,097
Lincoln Karl McCartney Conservative 1,443
Thornbury & Yate Luke Hall Conservative 1,495
Peterborough Stewart Jackson Conservative 1,925
Twickenham Tania Mathias Conservative 2,017
Cardiff N Craig Williams Conservative 2,137

http://blog.upad.co.uk/blog/is-buy-to-let-still-a-good-idea-after-the-budget?utm_campaign=newsletter&utm_source=hs_email&utm_medium=email&utm_content=21321388&_hsenc=p2ANqtz-8do9Fw_GfgmaTp3PYRpz8um_y3Xaoln__b8crk5P_Br8Q74mMokmuJV7rv69MdBmVKxmhgycMVykYOJ0CklaikhJEong&_hsmi=21321388

I have just received an e mail from UPAD , the on line Landlord self service letting agency distributing an article in todays newsletter basically saying it won’t affect most landlords that much.

Dose anyone know James Davies the founder of UPAD as this sort of mis-information is harmful to our campaign and attempts to minimise the impact of the proposed budget changes rather than highlighting the disasterous consequences . We need him to be emailing his data base with details of the petition and not sending out blogs like this

This is the relevant section of text which UPAD are circulating today

Newspaper columnists have been making hay following the buy-to-let tax changes announced in the most recent Budget, predicting that the measures would put landlords and the sector into reverse gear.

But the picture is more subtle. While many landlords may face higher tax bills, the increase will depend on the size of your buy-to-let mortgage, if you have one, how much you depend financially on the HMRC’s ‘wear and tear’ allowances and which tax bracket you’re in. So are the changes going to severely impact the sector or just tighten margins for some?

Mortgage interest relief

In summary

For many years landlords have been able to claim a percentage of the mortgage interest they pay against their personal tax liability. And the higher their income, the greater the tax relief they could claim. After a staggered introduction,this will be standardised from 2020 onwards when landlords will only be able to claim relief on mortgage interest at 20% regardless of their personal tax rate, (and therefore only 40% and 45% tax rate payers will be hit).

The impact

On face value it looks bad for landlords. For example a landlord who pays tax at 40% and used to claim £9,000 a year mortgage interest against their tax will be £1,800 a year worse off in four years’ time. But it won’t affect everyone. Allegedly, less than half of landlords have a mortgage, according to data from the Council of Mortgage Lenders and Paragon Mortgages (although some of the cynics amongst you may suggest not every landlord has a BTL mortgage...). Plus the new rules will only impact landlords who pay tax at 40% or above. But the average annual rental of a landlord is £12,000 p.a. which, together with an average salary of £27,600 (60% of landlords run their properties in addition to a job) means some landlords will stay out of the 40% tax bracket. Also, 21% of landlords, according to recent government research, don’t take an income from their property and therefore don’t pay tax.

Reply to the comment left by "Charmaine ******" at "15/08/2015 - 10:21":

Hi Charmaine

The article was written by a Marketing Executive.

I had just sent the reply below before I saw your post:

"Hi

I do not understand the point of the article playing down the effect of the proposed change to the treatment of finance costs. It will lull people who will be affected, but don’t realise it yet, into a false sense of security. Many people don’t understand it because it is described in language that only a tax accountant understands. We need to make them understand what is planned for them.

Bluntly, if the sum of your total income plus your BTL finance costs (including interest) is more than £43,000, you will pay more tax in 2020/21.

If you want to do your readers a service you should explain the effect this proposed change will have, and how they can help prevent it.

The website: http://saynotogeorge.co.uk/why-say-no/ shows how various groups of people will be affected, and how they can contact their MP.

This page: http://www.property118.com/contact-mp/77191/ describes what to write to him.

Many people wrongly think that they will be unaffected if they are currently basic rate tax payers. This page: http://www.property118.com/only-1-btl-and-hmrc-tax-me-out-of-business/77297/ shows how they may be pushed into the 40% band.

Finally, from the top of this page: http://www.property118.com/budget-2015-landlords-reactions/76164/comment-page-268/#comment-62071 they can download a spreadsheet which they can use to calculate their tax today, and what it would be in 2020/21.

It would be enormously helpful if you could send these links to everyone on your mailing list. I am sure they would be grateful to you for them. In fact, they need your help!

Kind regards"

I suggest that anyone else who receives Upad's email send a reply.

UPAD have got this wrong.
1. just because you don't take in an income doesn't mean it isn't profitable (and therefore taxable).
2. even if the profit is Zero it is probably because under the current rules the mortgage is taking such a big slice that no profit is being made. It will become profitable (at least in the eyes of HMRC) if the mortgage interest is taken out of the profit calculation.
3. they have taken into account the significant number of basic rate taxpayers that will be become higher rate tax payer because of this proposal.