Summer Budget 2015 – Landlords Reactions

Summer Budget 2015 – Landlords Reactions

14:00 PM, 8th July 2015, About 10 years ago 9619

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Budget 2015 - Landlords Reactions

The concern is;

Budget proposals to “restrict finance cost relief to individual landlords”Summer Budget 2015 - Landlords Reactions

To calculate the impact of this policy on your personal finances download this software


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Luke Marchbanks

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18:36 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Barry Fitzpatrick" at "12/07/2015 - 18:20":

I agree with Barry - as I actually fall into this category.

I earn 45k a year but pay into my pension so that I am below the threshold.

My property on current rules only slightly puts me into 40% rate by only 1k. With the new rules, I will now pay 40% on 6k. After the 20% (un)relief the effect is me paying £700 per property more than on the old system.

Could you imagine the effect that would have on 100 properties or more (obviously model and structure make big variances to these figure).

On average the property cycle lasts 8-10 years.

Last crash: 2008
Next crash: 2016/18?

Depends on how the bigger landlords play this. One thing is almost certain, the structure and strategies of btl will be very different in 2020. The cash rich should get some good bargains in the next few years if the house prices crash.

Luke

Mark Alexander - Founder of Property118

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18:47 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Barry Fitzpatrick" at "12/07/2015 - 18:20":

I disagree, an interest rate rise will not result in more taxable profit, in fact, it will reduce taxable profit.

Cash flow will be hit just like any other rate rise but you will not end up paying more tax.
.

AA

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18:48 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Simon Dewsberry" at "12/07/2015 - 00:30":

Then it becomes a race to the bottom. In my car illustration, we will all be renting Lada s. You can't have your cake and eat it. Not even the LA s . The rent for a property for illustration purposes say in Mayfair cannot be the same as in a Positive Discrimination ( as I like to call them) estate. Its not workable to place an arbitrary rent cap. You have to take into account location, size, condition etc.. If ROI is interfered with there will be a bail out by landlords. Any business model with fixed revenue and variable and volatile operating costs is not something you want on your plate.. The current measures by the budget is a shakeout for the highly leveraged. But it's not leverage in the normal sense,
It's the GP to finance ratio. In your example of £25k rent to £40k interest - that's a crazy scenario but very illustrative of the principal.

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18:49 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Neil Robb" at "12/07/2015 - 08:25":

But if one sets up his business as a business.....then interest is a legitimate cost.

This change has been brought around to begin to level the field for private individuals buying properties as investments versus private individuals buying properties to live in.

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19:30 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Mark Alexander" at "12/07/2015 - 18:47":

Mark,

Interest rate increase will make a difference as your interest rate will rise thus you will be paying higher amount of interest payment therefore more interest you add, higher the tax.

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19:33 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Appalled Landlord" at "12/07/2015 - 15:45":

Appalled Landlord, you seem to have understood this topic to the "T"....I suspect your accountant is same as mine...:-)

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19:37 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Jack D" at "12/07/2015 - 13:20":

Jack,

Give me a scenario in full and I will show you full workings!

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20:10 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Asif Ahmed" at "12/07/2015 - 18:48":

Asif .. i would think a "fair rent" for no. of beds and post code will be the order of the day rather than a fixed amount nation wide, but you can bet your arse it wont be as high as a Landlord would like.

Jack D

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20:51 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Gary Mason" at "12/07/2015 - 19:37":

No need to provide figures for you to provide detailed example now Gary as understood now as to how you were looking at this. Thanks to some posts earlier this afternoon.

Jason E

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21:10 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Mark Alexander" at "12/07/2015 - 18:47":

I think we have to be careful with the phrases people are using. It is ambiguous to say "profit", it's clearer to say actual profit or taxable profit.

If interest rates rise then my actual profit will go down as I am now paying more money to the lender. However, my taxable profit stays the same as interest deductions are not allowed. With the BOE interest rate set to rise over the coming years Its quite possible to create a scenario's of someone who have, say, £100K a year in interests payments and an actual profit that won't even pay their tax on their taxable profit!

Reading the current end of this thread I think the penny is beginning to drop that, as it currently stands, the people that will be effected is as much to do with the size of your interest payments as it is if you are a high or low rate payer or how much actual profit you make. Hopefully this might get softened a bit before it gets onto the books.

Jason

PS my spreadsheet if people want to play with scenarios ... https://drive.google.com/file/d/0B4DRc1psaxK-MnQxYmtGNkJUcUk/view?usp=sharing

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