Summer Budget 2015 – Landlords Reactions

Ros that's is basically the understanding I am having.

I have worked out my additional tax for 20/21 the same as you.

By the look of things you have a healthy turnover to cope with this but it is not nice to have to pay tax on a cost when other business do not.

It is going to work out for me across my portfolio about £266.67 per property a year So a small rental increase of £5.00 approx. per week. But I do have a few unencumbered properties to spread the cost.

I'm just looking at the HMRC guidance. This is the link for if anyone wants to have a decko (don't know how to spell that word - it just appeared from my childhood):

https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

Just a quick question. Can anyone explain to me in plain English, preferably with an example, what this statement means?

'Any excess finance costs may be carried forward to following years if the tax reduction has been limited to 20% of the profits of the property business in the tax year.'

Reply to the comment left by "Ros ." at "17/08/2015 - 16:42":

Well done Ros!

And the blog you linked to is excellent, too.
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Just one thing, under the proposal, the deemed profit will remain at £180k, (260k rent minus 80k maintenance etc.) regardless of how much the interest rate goes up by, because interest will not be included in the calculation.

The proof of this is that after the increase of 3%, the deemed profit is £10k real profit, plus 80k original interest, plus 90k extra interest. You would get 20% “relief” on £170k instead of £80k, but that is not much consolation.

Reply to the comment left by "Ros ." at "17/08/2015 - 17:17":

Hi Ros

It means that HMRC will compare your finance costs with your deemed rental profit and with the figure for your total income (excluding savings income and dividend income) minus the personal allowance. You will only get the 20% “relief” applied to the lowest of these three amounts.

The amount of finance costs minus the amount that you get relief on can be carried forward and added onto the next year’s finance costs for calculating the relief.

So, in the example in your blog, if your rent was catastrophically reduced to £130k, your deemed profit would be £50k after maintenance costs, etc. So you would get relief on only £50k of the £80k finance costs, and the other £30k would be carried forward to future years.

Reply to the comment left by "Appalled Landlord" at "17/08/2015 - 18:16":

Very good explanation, I'm glad you beat me to it 😉
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Another one for Thursday Mark... Students cant afford rent now, with less rented accom and higher rents on their way - students become another casualty of GO BTL budget

http://www.theguardian.com/education/2015/aug/15/soaring-student-rents-college-accommodation-crisis?CMP=share_btn_fb

Reply to the comment left by "Mark Alexander" at "17/08/2015 - 13:54":

By all means Mark. And there's more, as Jimmy Cricket used to say.

I’ve had another look at your invitation from the Treasury: http://www.property118.com/budget-2015-landlords-reactions/76164/comment-page-219/#comments

The Chancellor said on 7 July that the reason for the proposed change was to level the playing field l with owner occupiers. This was described as “plain wrong”.

The Treasury has changed the story. Your invitation says:

“By restricting the finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system.”

“This change will rebalance the tax system as it ensures all buy-to-let landlords will receive the same relief for their finance costs.”

This is not just wrong, it is deceitfully wrong. It claims exactly the opposite of what is intended.

For those who remain in the 20% band the effect will be the same as a deduction of 100% of their finance costs, like we all get now.

But for those who are (put) in the 40% band the effect will be the same as a deduction of only 50% (20/40) of their finance costs, because they will pay tax at 40% and only get a 20% “relief”.

And for those who are (put) in the 45% band the effect will be the same as a deduction of only 44% (20/45) of their finance costs, because they will pay tax at 45% and only get a 20% “relief".

Thus the intention is that all finance costs incurred by individual landlords will NOT be treated the same by the tax system. And this change will UNbalance the tax system as it ensures all buy-to-let landlords will NOT receive the same relief for their finance costs.

This double-think is reminiscent of the government’s New Speak in George Orwell’s 1984: War is Peace, Freedom is Slavery, Ignorance is Strength.

Do they think we are that stupid?

The invitation continues: “Landlords will continue to get full income tax relief on the other costs incurred in letting out a property, such as letting agent fees and replacing furniture, which constitute day-to-day running costs.”

So why not finance costs as well?

Reply to the comment left by "John McKay" at "17/08/2015 - 12:32":

I don't believe its landlords stopping FTB 's but once someone says it is, everyone just jumps on the bandwagon and says it true.

Its peoples choice lifestyle, mobility to move easy, debt from previous recession, low wages, zero hour contracts, not feeling secure with interest rates

It all these people GO wants to be FTB's gets a mortgage , how many would end up repossessed.
To easy for free credit buy now pay later no education on finance.

Reply to the comment left by "Trendo " at "17/08/2015 - 13:22":

My worry with this is he will still do it but use the other suggestions later on to.

No trust in government .

Rate of petition signatures have somewhat slowed down!

We had blip over the weekend before hitting abrupt halt!