Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Saeef Khan" at "31/08/2015 - 10:26":

Saeef. ...rather blindly optimistic I fear. PwC are currently my main client ......adittionaly i have my own accountant....and I can tell you....when it comes to crystal balls on matters of the economy and politics....I fear they fare no better than me.

Re, CGT, has anyone investigated further the reference in someone's MP's reply to Incorporation Relief - deferring the CGT until the shares are disposed of?

For new mortgages it would be better as Government's own calculations the effect will be "0" for two to three years.

We have had & continue to have various tier's of society. The fact that a well established taxation principal had been changed by the GO. will be the consequence of the tiers.

Interesting article by a Labour MP standing to be Depute Leader.

https://redbrickblog.wordpress.com/

The most relevant part is the last sentence in paragraph 2 which is provided in full below.

'To tackle Britain’s housing crisis means acting not just on social housing, but the private rented sector and home ownership too. It is startling to note that 2015 was the year more buy to let mortgages than first time buyer mortgages were issued. With the average age at which anyone gets on the housing ladder now 37, millions of people struggling to keep up with rising rents and long waiting lists for social housing we need to recognise the interconnected nature of these challenges. When it comes to keeping a roof over your head, Labour should not let this government set one sector against the other, or generation against generation, but instead act to ensure every citizen can access affordable and quality housing.'

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "31/08/2015 - 20:18":

Very interesting article I would love to know what her opinion of the effect of the new taxation will be. She comes across as very knowledgable. I'm going to try to get in touch with her.

As it's a quiet news day, I thought I'd share this article:

http://www.landlordzone.co.uk/content/the-falacy-of-high-yields-in-rough-areas

Some of us can recognise the figures in the article relating to so-called 'high yield' areas - which demonstrate the gulf between London and some of the poorer areas of the country. I don't think GO and his advisers have given one thought to these other areas - where, also, house prices and rents have been static for many years.

Reply to the comment left by "Ros ." at "31/08/2015 - 21:22":

Ros: Non incorporated LLs (ones with mortgages) cashflows in areas that are both in (1) high demand from end users and (2) low yielding like London will be adversely affected the most. By far.

Coverage in the landlord law blog

http://www.landlordlawblog.co.uk/2015/08/24/buy-to-let-landlord-tax-changes-a-catastrophe-waiting-to-happen/

Reply to the comment left by "Mark Shine" at "31/08/2015 - 21:51":

Hi Mark.
I agree that it must be very difficult in areas like London, especially if you have a really high mortgage - I did actually write a longer post, which I edited not to bore everyone - but regarding how it is stupid how people go on about really high rents in London, without taking into account the really high costs of buying and mortgages. It's not easy for anyone. But I do think GO doesn't think about the areas outside of London - and when he thinks of London he also would have no sympathy for what he calls the 'wealthiest landlords' - when he is actually targeting the landlords who owe the most (whilst conveniently forgetting about the actual wealthiest ones - possibly his mates). I've said it before - we get the flack from 'below' from those who think we're capitalist scum and from 'above' by those who think we are the tacky nouveau riche.

I am preparing for a meeting with my MP later this month. I am putting together a series of notes for the meeting; I'd appreciate your inputs on this anything I've missed out, etc.

Does anyone have any stats regarding the "only 1 in 5" Landlords will be affected?

1. “The Government is committed to a fair tax system”. So comparing a Private Landlord with:
a. Owner Occupiers:
i. do not receive tax relief on mortgages
ii. do benefit from a £1m IHT threshold
iii. do get Principle Private Residence relief on sale
iv. “Help to Buy” (HTB)
*. HTB scheme
**. HTB Isa
v. are not required to obtain an Annual Gas Safety Certificate.
vi. are free to evict a lodger subject to providing “reasonable” notice,
without having to refer to the Courts. This is very fair and prevents the
Court systems from clogging and should be extended to private
landlords.
vii. are not required to protect a lodgers rent deposit in an approved
government scheme. This should also be extended to private
landlords.
viii. may choose to have as many people as they wish living in their home
without the requirement to purchase a licence.
ix. do not have to abide by over 50 Laws governing the provision of
rental properties that Landlords have to.

In reality it is fatuous to actually compare a Private Landlord with an
Owner Occupier.

The Institute for Fiscal Studies, IFS, has stated that Individual Landlords are already taxed more heavily than other homeowners; and this measure is “plain wrong”.

b. Incorporated Landlords
i. Private Landlords with large incomes (i.e. higher rate taxpayers)
already pay twice the amount of tax (i.e. either Higher Rate Tax, 40%,
or Additional Rate Tax, 45%, as their comparable incorporated
counterparts, this measure will widen the gap still further. To be “fair”
they should pay the same rate of tax.
It’s appreciated that there is additional tax to be paid if the business
owner withdraws cash either as salary or as dividends but this is tax
on actual profits
ii. All businesses including all other Sole Trader & Partnership
businesses work on the principle that taxes are payable on profits
made by the business i.e. revenues less expenses including finance
costs. Changing this can result ridiculous effective rates of taxation in
excess of 100% i.e. the tax due exceeds the actual profit made by the
business.
No other business is taxed this way.

c. other non-mortgaged Individual Landlords
i. the wealthiest Landlords often do not have mortgages on their
properties and therefore this measure will have no effect on them.
ii. these Landlords will still receive relief at their marginal rate of tax on
all other non-financial expenses.

2. “Currently the landlords with the largest incomes benefit the most, receiving relief at their marginal tax rates of 40% or 45%.”

a. This is only because private Landlords are tax on their rental profits at their
marginal tax rate (unlike incorporated Landlords who are only taxed at
20% regardless of income). If private Landlords where taxed on their
rental profits at 20% then mortgage interest relief would be only 20%.
b. many of the wealthiest Private Landlords often do not have mortgages on
their properties and therefore this measure will have no effect on them.
They will still receive relief at their marginal rate of tax on all other non-
financial expenses. This measure will hit many less well off Landlords with
1-5 properties and other sources of income (e.g. from employment or a
pension) and have a property portfolio to supplement their income and be
less dependent upon the State.
c. This measure though intended to ONLY affect Higher Rate Taxpayers and
Additional Rate taxpayers will cause many Basic Rate taxpayers to be
deemed to be Higher Rate Taxpayers for the calculation of their tax
liability.

3. “Buy-to-Let Landlords are competing with First Time Buyers” for properties.

a. recent studies have shown that FTBs having sufficient savings for a
Deposit and the new affordability tests introduced under the Mortgage
Market Review, MMR, are what are the major factors that are preventing
FTB’s getting on the housing ladder. This followed by a lack of supply of
new housing.
b. The proposed tax change will reduce the number of rental properties
available, and will push up rents. Thereby making it even harder for FTB’s
to save for a Deposit.

SORRY the formatting has gone to pot, especially the indenting.