Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Jim S" at "03/09/2015 - 20:41":

Hi Jim

If your interpretation were right, it would mean that the proposed change would not be implemented – we would continue as before, and any new buyers would be treated the same as us.

The webpage: http://news.rla.org.uk/chairman-asks-chancellor-pause-for-evaluation/ shows suggestion number 1 as “The measure should be re-cast so that the right of deduction is retained even if interest is only relieved on a basic rate.
This would mean that the landlord would only be taxed at the same rate as is applicable to their true profits i.e. as if the interest paid was still deducted.”

The second sentence is not true. If higher rate taxpayers only had interest relieved “on a basic rate” it would mean that they would be paying a levy on finance costs of up to 25%.

In the full letter there is a third sentence: ”This would avoid landlords being dragged into a higher rate of tax.” That is all suggestion 1 is about – preventing basic rate tax payers from being pushed into the higher rate tax band.

It’s a pity they didn’t put the third sentence on the webpage.

My interpretation of the second sentence "This would mean that the landlord would only be taxed at the same rate as is applicable to their true profits i.e. as if the interest paid was still deducted.”
means that suppose you were a 40% tax payer, then under new rules from 2020 you would only be able to claim at 20% tax payer rate ie now only half of your interest as an expense, but at least that half of interest would be deducted from your gross profit to arrive at your net taxable profit. This would at least allow that as a 40% tax payer you will not as easily be pushed into becoming a 45% tax payer. The RLA are asking for a small mercy that at least the calculation of profit is carried out fairly.

Reply to the comment left by "Lisa Stux" at "03/09/2015 - 16:54":

Hi Lisa,

I was subjected to that same kind of anger following the Telegraph article. I was told by landlord haters to sell my properties to FTBs, as though the flats I bought were snatched from their very hands. My experience was close to Ros', though.

However, I've noticed since the recession more and more estate agents are hosting "open house" events to put landlords up against buyer occupiers, as they do in London.

I've been reflecting on the problem, and it is so complex that I doubt I'll see it resolved in my lifetime.

I was priced out of London and could only buy my house outside it. The other properties followed because I could buy more by then, and after London there do seem to be surplus for sale in many areas and not enough buyers.

The problem will continue in areas such as London though, because there is no unified housing policy that attempts to tackle all the problems in both the public and private sectors. To sell off so many properties in the public sector in so many decades, only to have the properties sold on to investors, and without building the same number to replenish stock was a huge catalyst. The strain was passed onto private landlords, and while it suited, they rose to the challenge and reaped the returns.

As I recall, Local authorities bought back properties when they realised they were unable to accommodate those in need, and they bought back at market value or almost market value, having sold at huge discounts. All this was supplemented by tax payers.

Landlords are not blameless, and there are sourcing companies buying huge numbers of properties at a discount in order to pass on the discount to investors. One company I won't name claims to be able to source 80 properties a month for their clients. Bulk buying, not something an average landlord is able to do, but there is obviously the demand and the clients lined up.

It's like trawler fishing, the smaller fishermen with their nets, and the Eskimos with their lines: at the end of the day there is still overfishing and not enough stock.

Reply to the comment left by "Jim S" at "03/09/2015 - 22:12":

Hi Jim

The RLA is not suggesting that half of the interest be deducted, they are suggesting that it all continue to be deducted.

I agree that this would stop a landlord from being pushed from the 40% band into the 45% band, but I don’t think that was foremost in the chairman’s mind. I think he had in mind preventing landlords from being moved from the 20% rate to the 40% rate.

This would still leave landlords who have more properties, and who are therefore in a bigger way of business, paying a levy of up to 25% of their finance costs.

Connie & Shakeel,
Yep I agree with both of you....we just need to build more houses, not to be taxed more.

Of course its a necessity to build more homes and it would be morally wrong for landlords to resist more house building but be careful what you wish for. If house building was to go up to its needed level (about 400,000 new builds a year are needed) both rents and prices will be a good deal lower in real terms than they are.

Reply to the comment left by "Roger Rabbit" at "04/09/2015 - 00:21":

Yes, there's negative equity and who wants to sell lower than they bought, especially homeowners. Rents going down would be good for renters and not landlords. There's the rub.

However, for the good of so many, perhaps that would be a good thing. Yes, landlords would be out of business, but the government is effectively bringing about that end anyway. It's the extra revenue from this tax that will be funding building plans - how else is the government going to do this? This was a planned move. Like so many landlords, I hope the government decides not to persecute us for years of providing homes for people, but we've fulfilled that usefulness and they need their revenue, unfair as it is to us. It's a whole can of worms when we start talking about fair. Is it fair to the younger people who can't buy?

Let's face it - we saved up for years and must pay other people who are not able to save now. We're deemed to have added to the problem - even me who only became a landlord last year. This is the government's answer. Successive governments have allowed the housing crisis to exist and persist, and they have no other solutions. This is a retrospective tax - trying to undo decades of harm. "All are punished." Apart from the government - and the very rich.

Reply to the comment left by "Connie Cheuk" at "04/09/2015 - 07:37":

Connie, I'd love to think that the money they are planning on taking from us will go to building houses, but I doubt it...it'll just get lost in Britain's overall debt.

But if it should be used for house building, I still can't see that they can ever build enough...at least in the South East.

See the petition website is down - again!

The cover story in this weeks Moneyweek is titled "The End for Buy-To-Let"

Here's the link: http://moneyweek.com/the-death-knell-for-buy-to-let/
but I think you have to be a subscriber to read the whole article.