Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Lisa Stux" at "21/08/2015 - 15:18":

I think we all get a little confused by the workings Lisa, maybe that's a sign of how nonsensical it is but I think Jerry has worked it out the correct way. I haven't actually checked the maths - no reason to doubt him, but I think the methodology is correct.

Reply to the comment left by "John McKay" at "21/08/2015 - 15:51":

Great work John. Maybe it'll start filtering through to estate agents nationwide after this.

Reply to the comment left by "Jerry Jones" at "21/08/2015 - 12:50":

Jerry I agree your response to your MP is very good. I agree with Ros that once it is finalised a copy should be sent to Richard Dyson at the Telegraph. Please publish your final version on the Forum as I wish to send a copy to my MP.

Interesting article in The Guardian.

http://www.theguardian.com/commentisfree/2015/aug/16/matthew-taylor-we-must-face-difficult-truths-to-solve-housing-crisis?utm_content=bufferf1022&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "21/08/2015 - 18:54":

Yes, it's a really good article. Strangely enough my brother spotted it in Scotland last week and gave my mother a copy to give to me. I've used the statistic about 25 million bedrooms unoccupied in one of my reports.

Reply to the comment left by "Ros ." at "21/08/2015 - 19:21":

I think the bedrooms issue is a bit of a red herring. I don't think people should be forced to leave their homes because they have empty rooms - should an elderly widow be forced to relocate, leaving her friends and relatives, because she is now single has a two bed house or should she be forced to take a lodger (who she is always worried about in case s/he bullies her or steals something or just wants to stay up late)?

My house looks as though it has an empty room but it is converted into an office and used for business - trunking, more than 20 double power sockets and office-style lighting.

Final version, as posted today:

Dear Mr Penrose,

Thank you for your letter, which is pretty much a summary of the Chancellor's justification for this wholly unreasonable change in the taxation of landlords' finance costs. You asked me to let you know if you had missed anything out so I am doing as you requested.

I reject the idea that landlords have an unfair advantage over either companies or homeowners.

Companies can deduct all their finance costs from income before paying tax on their resulting profits at the rate deemed appropriate, as can sole traders in any business other than property letting (see the example below for the effect that this change will have on property letting businesses that are run on a sole trader basis). Money necessarily paid out to someone else should NOT be regarded as part of taxable income of any enterprise, whatever its structure.

As to whether private homeowners are taxed less favourably than landlords, consider the impact of two homeowners swapping properties and renting to each other for identical rent amounts. By renting these same properties there are subjecting themselves both to capital gains tax if they sell and income tax on rental income less costs. Even where their costs (e.g. repairs, mortgage interest) exceed their rental income this will leave them in an inferior tax position as such tax losses cannot be offset against other (non-property) income and they still face a potential capital tax liability.

I have a feeling you may not have grasped exactly what the problem is, so allow me to illustrate it with a worked example, based on your own circumstances as an MP who draws a salary and expenses from the public purse.

In broad terms, your current income is composed of £74000 salary as of May this year plus expenses, based on the complete year of 2013-14's figures, of just over £129000, of which £111000 was staffing costs. In this respect you are in quite a similar position to many landlords as regards their income. In your case the total is £203000, of which part is taxable and part is an expense and thus deductible. On that basis, in very broad terms, you are liable for tax of around £19000, leaving you a post-tax income of £55000, all of the expenses income being paid out again.

Let us now consider the position if we reduced the tax relief on part of your expenses to 20%, using the same mechanism that is proposed for landlords. Because mortgage finance is usually the major expense in property, let us treat your staffing costs in the same way - MPs expenses are no more of a sacred cow to the Great British Public than landlords' income, so the parallel is rather appropriate - nobody will be rushing to the barricades to defend either of us.

Your taxable income is now deemed as £185000, comprising your salary and that part of your expenses that you use to pay staffing costs. The tax liability on that income is £69400.

"But wait", I hear you cry, "what about the 20% tax relief due on my staffing cost?" Quite right, 20% of £111000 is £22200 so we can deduct that from the raw figure - your tax liability is now reduced to just £47200, which, because all of your staffing cost expenses are actually paid out again, you must pay out of your £74000 salary, leaving you a net income of £26800, around half of your previous take-home pay. Good luck with running homes in Somerset and London on that income!

This is only fair, of course because, as you said of landlords, reducing the tax relief on your staffing costs will “level the playing field” between MPs and ordinary citizens who don’t get tax relief for employing nannies, cleaners, gardeners and the other staff they need to support their households.

The figures are actually far worse than that for many landlords, who will be expected to pay substantial tax out of a negative cashflow.

Do you now understand the reason for our concerns?

Yours Sincerely,

Jerry RM Jones

Jerry, good luck. Even though you have laid it on a plate. Little chance of our moron MP's being able to understand your excellent comparisons.

Reply to the comment left by "Jerry Jones" at "21/08/2015 - 22:41":

Great stuff Jerry.
Would you like one of us to contact Richard Dyson at the Telegraph and show him your excellent comparison of MP versus private landlord? I believe that Mark knows him, I know that Connie has spoken to him and I have written to him so one of us can do it. Would you be happy for us to do that and would you prefer your name is or isn't used?
I'm so pleased that you thought of this different angle. It was creative and is a compelling argument. This is the kind of thinking and acting that is going to win this case for us.
By the way, the petition has just gone over 15,000 and we have now leapfrogged: Stop all benefits to illegal immigrants completely! (bloody hell, what do they want? That they all starve to death?)

Reply to the comment left by "Jerry Jones" at "21/08/2015 - 12:50":

This should really hit home, get them to take notice, I am sure when it gets published many MP's will start making noises to try and stop their affairs getting into public domain
Absolutely looked it!