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

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Mark Alexander - Founder of Property118

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22:35 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Colin Dartnell" at "12/07/2015 - 22:27":

Yes, SDLT has been mentioned, as has CGT, refinancing costs, less choice and higher rates for Ltd. Company borrowing etc.
.

Appalled Landlord

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22:44 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Appalled Landlord" at "12/07/2015 - 22:26":

.As is the case today, you would not be able to set off this loss of £25,000 against your other income for the tax year.

But unlike today, you would not be able to carry it forward to the following year as a tax loss, because the change in rules will have turned your result into a tax profit.

Jason E

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23:28 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Mark Alexander" at "12/07/2015 - 21:47":

Hi

Yes, that basically follows my understanding. In scenario 2 you are making £0K actual profit and paying £75K in interest making taxable profit of £75K. In scenario 3 you are making a £25K loss and paying £100K interest making a taxable profit of £75K i.e. the same.

Problems start with the rules over what sum of money you get the tax relief on this tax reduction will be calculated as 20% of the lower of:

a) the finance costs not deducted from income in the tax year (25% for 2017-18, 50% for 2018-19, 75% for 2019-20 and 100% thereafter),

b) the profits of the property business in the tax year, or,

c) the total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year.

Notice that it's the lowest figure you'll get the tax allowance on. So for scenario 3 that's

a) £100K
b) 75K
c) 75K - £10,600 (probably and also assuming no other income)

The reason I joined this thread as I managed to have clarified point b. As a non-tax person I originally feared they meant actual profit but it is indeed taxable profit (if actual profit they would be no relief in this scenario). "C" would depend on what other income the person has but again, I would imagine that "income" is "taxable income" i.e. your other income plus taxable profit. If that was the case and property was your only source of income then I assume you are looking £75K minus the personal allowance (if it was actual income again the allowance would be zero).

For scenario 2 I calculate the actual profit at £0K and your tax at £6,523 (so take home is -£6,523). For scenario 3 I calculate your actual profit at -£25K and take home -£31, 523 i.e. the same tax to pay.

With all things I can only say this is what I think the situation is, I'm still waiting for the higher powers (i.e. accountants) to confirm all this.

Mark Alexander - Founder of Property118

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23:38 PM, 12th July 2015, About 10 years ago

Reply to the comment left by "Appalled Landlord" at "12/07/2015 - 22:44":

My gut feeling is that you are wrong, but that might be down to terminology or because I don''t entirely follow the points that you are try to make or whose comment you are responding to. You appear to be replying to yourself.

Please clarify.
.

Shakeel Ahmad

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23:47 PM, 12th July 2015, About 10 years ago

I have exchange some emails with Megan shaw of hmrc.gsi.gov.uk. I must say I found her to be very efficient and understanding.

In one of her emails to me she had assured e that the matter will only progress after consulting the industry.

I suggest we all should approach the various bodies e.g RLA & others such & in addition other channels to make this ridiculous situation into a commercially pragmatic, just & equitable basis.

Luke Marchbanks

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0:04 AM, 13th July 2015, About 10 years ago

Reply to the comment left by "Mark Alexander" at "12/07/2015 - 23:38":

As we are currently, any losses we make can be carried over to following years to offset future profits.

I believe he is referring to this no longer be possible due to the fact that HMRC will only be looking at 'Taxable Profit' not 'Actual Profit'.

- this could well be correct!

Mark Alexander - Founder of Property118

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0:26 AM, 13th July 2015, About 10 years ago

Reply to the comment left by "Luke Marchbanks" at "13/07/2015 - 00:04":

Yes I agree, carry forward losses for tax purposes will become very unusual (only likely scenario I can imagine is massive voids) when the new tax regime takes effect and any existing tax losses rolled forward will be used up very quickly.
.

Joe Bloggs

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0:33 AM, 13th July 2015, About 10 years ago

Reply to the comment left by "Mark Alexander" at "12/07/2015 - 22:13":

hi mark,

you state:
'My current thought process is to look at reducing the LTV on my interest bearing loans by paying down to 65% LTV and then gearing back up to 85% LTV by using Equity Finance top ups.'

can you please explain how this will help as wouldnt 'equity finance top ups' still fall within the hmrc definition of finance costs?

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0:38 AM, 13th July 2015, About 10 years ago

This is going from bad to worse. i am on 45% before this lot even starts to kick in.

Mark Alexander - Founder of Property118

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0:40 AM, 13th July 2015, About 10 years ago

Reply to the comment left by "Joe Bloggs" at "13/07/2015 - 00:33":

Yes but the cashflow position is massively improved due to there being no monthly payments on the Equity Finance element of the debt.
.

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