Summer Budget 2015 – Landlords Reactions

Please keep your MP updated on how things are going with the campaign. I have sent this to my MP tonight.

It has been several weeks since I wrote to you about the UK Government’s proposal to restrict finance cost relief for individual landlords.

Much has happened since I wrote to you last.

Firstly, the e- petition against the proposed tax change is doing very well. Over 18,000 signatures have been achieved so far. It has now reached the point where the Government must provide a response.

There was also very good coverage in the Daily Telegraph on Saturday. Here are links to the articles. The Telegraph has agreed to campaign to ‘Axe the buy to let tax grab’ and says that ‘this Alice in Wonderland tax sets a new benchmark in absurdity’.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816726/Buy-to-let-tax-My-five-properties-were-my-pension-now-my-tax-bill-will-jump-38pc.html?fb_ref=Default

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816733/Alice-in-Wonderland-buy-to-let-tax-sets-a-new-benchmark-in-absurdity.html?fb_ref=Default

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html?fb_ref=Default

Could you please confirm if you have sent my previous correspondence to the Chancellor asking him to address the points I have raised.

I have yet to see any SNP statement about this tax proposal. Can you confirm if the party has yet reached a position on the matter?

Housing is obviously a devolved matter for the Scottish Government. Can you confirm if the Scottish Government was consulted about the proposed tax measure in advance of the Summer Budget? As mentioned in my previous correspondence to you, this campaign is not just about landlords protecting their property businesses. It is about trying to avoid the unintended social and economic consequences of this ill thought out tax proposal which will reduce the size of the private rented sector. This in turn will reduce the number of houses available for people on benefits and low incomes and increase homelessness in Scotland and elsewhere.

The tax is a difficult one to explain to people who are not landlords. There is an example being circulated to MPs to try to explain how an MPs’ income would be affected if it was taxed in the same way as the landlord taxation proposal. I thought you might be interested in the example so here it is:

‘Mr Vara,

I feel I need to explain in terms that politicians will relate to, what this tax rule is to us Landlords.

As an MP you are enjoying a salary of £74k pa and whilst you also receive rent from your London flat I cannot include it within my example as I do not have details. You also have parliamentary expenses of £128,337 which are completely allowable and thus do not affect your income, so your take home pay after tax is currently £48,640. This ignores any NI contributions and so forth.

The greatest of the expenses is your staffing costs at £112,421 and clearly makes up most of the overall figure, much like mortgages make up the largest cost to most landlords. So let us apply the same rules of this tax proposal to your MP’s salary Mr Vara. The staff expense is now added to your income resulting in a make-believe salary of £186,421. If we now work out the tax deductions but throw back in the 20% staff cost relief, your personal allowance completely disappears, your tax increases to £52,084 and your take home pay drops to £21,196.

This represents a 56% reduction in your take home pay and an effective overall tax rate of over 70%!

This is what George Osborne’s proposal means Mr Vara, do you understand the impact? Unfortunately though it will be much, much worse for many landlords and they will be forced to increase rents or sell up if they can. Many cannot sell though due to the CGT issues and HMRC will bankrupt them. Tenants will either face enormous rent hikes or will be evicted. This is the plain truth of the Chancellor’s
proposal’.

I look forward to hearing from you and as previously stated I am happy to meet with you to further outline my concerns about what this tax proposal means for landlords and tenants.

WOW over 18000 signatures!

Article in the Daily Mail about offshore firms snapping up UK property.

http://www.dailymail.co.uk/news/article-3208314/Offshore-firms-snap-150bn-UK-property-past-15-years-Figure-welfare-defence-budgets-combined.html

In order to possibly pay more money out in tax , we clearly, in order to keep this business model alive, need to pass on costs & get more money inbound, or rent in. There has been much talk of putting rents up and counter arguements about affordability in the market place. As the gloves are now off and it is survivial time , from next year, my student properties will no longer benefit from the rent perk, or relief, of paying half rent for for the summer months of July and August (which translates very quickly into a disount of 1/12th or 8.3%) .This very small change will increase returns by 9.09 % ...(£1000/11000 *100) and can no longer be offered (or subsidised by me) . This is not for me to buy more champange & oysters, this is so that when then boiler dies i have the money aside to replace it.
In all honesty GO proposals have made me critically analyse every single property within my portfolio and and view the options in micro-detail. If we are to pay out far more, then all options must be considered on how to maximise inflows to balance this off. I have got tenants who have been with me for 15yrs +, on very much, below market rates ( yes i am an old softy ....or rather... i was .Hard as it is, they will be getting rather larger rent increase....or notice ...

i have spoken to several people today and been quite tearful at the reaction of rent hikes .... (and i'm a bloke!)

"you are a great Landlord and we dont want to be with anyone else , you are a family friend who goes far beyond the description of Landlord, you came to my xxxxxx 4th 5th & 6 th birthday parties, we know that if we have any problems you will resolve them , we are so grateful to you for your understanding when xxxx lost his job and we couldnt pay the rent for 3 months , clearly no institutional LL would EVER allow this , you are so much more than a LL as you well know, we also understand from your explanatiom that you are not going to get this extra money, we understand that the conservative government will take it all, we just wish you had had a crystal ball and and bought this property as a ltd company so that instead of paying the government all this extra money through our rent we could take our kids on holiday abroad, instead of camping, we wont be voting for these idiots ever, truly i tell you. Of course we have signed the petition - these Tories are not just dull they are mental, seriously, do they think they are going to get our votes by taking or homes away from us and stealing our childrens memories of stolen foreign Holidays? Now they propose big ghetto tower blocks with with institutional faceless, un flexible LL is this answer .for my familt ...with no garden or a drive .OMG what planet are they on? We know you , we like you , you look out for us, we have no worries about maintenance or upkeep, one call and you sort everything. I need to be near my old Mum and i help my sister with her kids , i really dont want to be living on a block with a load of nutters, really i dont. If there is anything i can do to help let me know , thank you for the link to the petition ...these idiots in Ivory towers have no idea what real life is like at all, i really hope this ridiculous tax soesnt go ahead , , people like me will be the ones that really suffer" A. TENANT.

Dear George , this is silly , now is a good time to reflect and stop this nonsense , no good can come of it . Really it cant, look deeply into the effects you appear not to have considered like the above, you are destroying peoples lives (not the rich ones - the VERY people your misguided policies will supposedly help- it wont) , you have got this so wrong it is unbelieveable, hope you come to your senses soon, £616 m from tenat like me .....what will you get if you actually did your job and made Amazon & starbucks & the like pay their proper due ? What if you taxed the people with the real money ..all the multinationals, the bankers, the city corps, the MPS with silver spoon money (except wallpaper company Heirs with offshore trusts off course !) What if you taxed them what they SHOULD be paying instead of wining and dining them on my tax money ...would tat raise more , less or the same as stealing my kids future? George ...go look in the pigging mirror , you , fool , are in charge of this countries finances , as you can tell i an a tad unimpressed with your reasoning and ideas, if you think i am wound up , just wait on , the media spin will undo , and the people will be heard. You sir will fall. That is all. Maggie - poll tax. George - Lanlord tax . RIP.

I so need to copy some of your wording for my meeting with Mark Lancaster in a couple of weeks time. Hope you don't mind!!
I see the petition has been gaining some momentum, probably in part to many landlords coming back from summer holidays and only now catching up on property news.

Reply to the comment left by "Darren Bell" at "25/08/2015 - 05:36":

I still find it hard to believe how many LL's are unaware of the change. I spoke to my local FSB Director yesterday. I don't know what his borrowings are but I know he has 5 rented properties.

He couldn't believe what I told him and described the tax as 'bonkers'. A great word and I chuckle every time I think of Richard Dyson's description.

I asked him why I hadn't had a meaningful response from a letter I wrote to the FSB on the subject many weeks back. He was of course completely unaware of the letter as he was the issue but is now on the case.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "24/08/2015 - 18:32":

The race is on...forgive me if I am wrong but will the petition not have to reach 100000 before Nov when royal assent is given?

Somenoe asked the question about where Tenant Satisfaction figures come from.

Usually it is the English Housing Survey.

The home page for all versions including 2013-14 just out are here:
https://www.gov.uk/government/collections/english-housing-survey

The 2012013 version is reported here in July 2014 by the RHA:

http://news.rla.org.uk/growing-number-of-private-sector-tenants-satisfied-with-their-property/

The full doc is here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/335751/EHS_Households_Report_2012-13.pdf

And a piece on falling satisfaction in the Housing Association sedtor ! (Free registration)
http://www.insidehousing.co.uk/exclusive-tenant-satisfaction-dips-at-uks-largest-associations/7006938.article

Reply to the comment left by "Matt Wardman" at "25/08/2015 - 08:31":

Thanks so much for that Matt. It was really useful for supporting a few arguments in a submission I'm making. Great team work!