Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ian Simpson" at "18/08/2015 - 07:48":

HI Ian

I assume this is what you are thinking about

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

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.

I cannot see how carrying forward excess finance costs will matter.
You are going to have excess finance costs every year you operate ??

Reply to the comment left by "Saeef Khan" at "18/08/2015 - 09:20":

Maybe the phasing is being done so that he can gauge impacts and do the inevitable u-turn when he realises what a disastrous mistake he's made! Hopefully, he'll see the disastrous mistake before April 2017 - as masses of BTL landlords try and sell up and send the market into a downward spiral?

Reply to the comment left by "Matthew Dervin" at "18/08/2015 - 09:22":

Matthew, you hit the nail right on the head.

My sentiments.

I think GO is in no doubt of the massive impact this measure will have on LLs. why else would he phase it in over 6 years. Perhaps he hasn't fully understood the ramifications on Tenants though.

GO with his image of being the Iron Chancellor has painted himself into a corner as he can't be seen to make a U-turn. IF ( and it's a big IF) he wants to change this he's got few choices without losing face:

1. only tax LL at the Basic rate - this will achieve the headline of reducing tax relief on finance costs, and it will tax LL the same as Ltd Cos. i.e. at 20% (until of course corporation tax is reduced to 18%), and so he can claim it is fairer/more balanced. Technically he still makes the tax savings. Against this he is going to lose the extra tax on Higher Rate/Additional Rate taxpayers of residential properties - I don't know how much that amounts to.
2. Apply the new rules only to new property purchases. This will achieve most of what he wants to do by reducing demand by LLs and so, in his mind, make it better for FTBs; fulfilling his promise to FTBs.

We have to find a face saving wayout for GO if we want to win this.

Reply to the comment left by "Ros ." at "18/08/2015 - 09:50":

Ros, as I stated earlier, it could be the stunt which he is imposing upon buy to let investors so they behave themselves and don't go crazy on buying further properties.

His motive could be in line with BOE as Mr Carney has vowed to keep house prices inflation no higher than 5% a year.

As I stated earlier it could be scaremongering but I can not state this categorically, what chancellor may or may not do.

Reply to the comment left by "Barry Fitzpatrick" at "18/08/2015 - 09:52":

Barry, I agree with your point 2 as this could be his face saving exercise.

If you remember, legislation is in draft document only and it is yet to be finalised with saliiant points.

Similarly, Non Resident CGT Abolition is only applicable from April 2015...therefore any gains accrued prior to April 2015 remain Tax free should you wish to become non resident.

Reply to the comment left by "Barry Fitzpatrick" at "18/08/2015 - 09:52":

HI Barry

I am not sure Mr Osborne desires or intends to make a U-Turn.

If lots of BTL Landlords pay £millions of additonal Tax to the Treasury - Hurrah

If lots of BTL landlords sell up and pay £millions of additional CGT + stamp duty for the Treasury - hurrah.

Hundreds of thousands of new homes on the market - Hurrah

Thousands of BTL landrords will lose out - but not enough votes to case George Osborne to lose any sleep

Can some one help me please . The more i read on this thread, the more and more confused i become . I fear I have lost the plot and no longer fully understand the actual impact of these proposed changes.
I woke up this morning to the most recent Landlord Today newsletter and could be forgiven for thinking that all of this was just a bad dream and it is business as usual
- up to 4 million 18-39 year olds still looking to acquire a buy to let property
, Newcastle Building society launching itself in the buy to let market,
The housing minister back tracking on Long Term Tenancies etc etc .
On top of all that , I had a conversation with my specialist buy to let mortgage broker yesterday whom I have used for many years and she said there had been no slow down in her volume of business recently .... Having said that I don't think she has understood the proposed changes and I don't believe her clients have either.
I am not especially thick or stupid and do have a few academic qualifications worth hanging up in the downstairs loo, but I simply do not fully understand anymore . I thought I had a good grasp of this but now I am not so sure .
Can someone please help summarise the impact in a way which I can understand and relay to my friends, fellow investors , family members etc , in particular incorporating this statement "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." as this was the final straw of confusion . There must be plenty of people who are thinking the same but don't want to look dumb by asking .
Thank you for your support and help.

Reply to the comment left by "Ian Simpson" at "18/08/2015 - 07:48":

Hi Ian

The “relief” will be given by subtracting it from the tax calculated on our deemed income.

In arriving at our deemed income, HMRC will disallow, i.e. ignore, our finance costs.

The amount of the “relief” will be calculated by multiplying our finance costs by 20%, full stop. There will be no remaining 80% to carry forward, as 100% will be disallowed.

Excess finance costs to be carried forward will only arise as follows:

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.

Reply to the comment left by "Charmaine ******" at "18/08/2015 - 10:19":

I think it's very likely that prospective BTLers don't understand the implications of the legislation and watch too much Homes Under the Hammer from 5 years ago. They are most probably currently standard rate tax payers and don't realize that they could be pushed into to the higher tax band. There will be new entrants to the lender market to provide products for Ltds and repayment products, and the banks don't care about your mental health as long as there is some way for them to get their money back.