Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Manchester Landlord" at "15/09/2015 - 17:22":

which is why we need to get more vocal and start to get press. I am convinced that people don't know or don't believe and so we need to ramp up lobbying and get media attention or this will go through as politicians will say "well look, hardly anyone objected!"

I am up for crowd funded newspaper advertising full page stuff, rallies etc. I also think the public bills committee or HMRC should be advertising or forcing the lenders to write to tenants and borrowers clearly explaining the change and likely impacts on them. This is about housing and George Osbourne is managing a stealth like introduction to the biggest rent hike ever...and he getting away with it.... so far!

Reply to the comment left by "Mark Brown" at "15/09/2015 - 17:30":

By all means email it to me, together with your contact details, and I will be happy to forward it on to Richard for you. My email address is mark@property118.com
.

Reply to the comment left by "Mark Alexander" at "15/09/2015 - 17:40":

Let me try to get to Rebecca Pike and see if she will run something on it

I am in the camp that says that Telegraph article isn't very good

The maths is flawed (double interest counting), the assumptions (6% compound growth and flat rent) are bonkers and, as others have said, the glaring claim of a near £600k after tax profit (incorrectly calculated) knocks all the other arguments out of the park.

The proposed budget changes aren't especially complex, but some of the articles and interpretations of them that I have seen have left my head spinning. Anyone that doesn't research this on their own and decides what to think about and what to think based on the newspapers is going to have a very skewed view on it!

exactly jon,

simple truth is landlord or not most people simply cant do any math beyond maybe how much change they are due on a fiver at the supermarket.

The article suggests landlord will make close to £600,000 on a single BTL. Its totally wrong and totally misleading and to be frank what do we have to complain about if we are making £600,0000 per property?

I dont mean this to be an insult, if you are reading this mr dyson we all make mistakes, but its a terrible article.

the argument should be based on fairness of the tax system and the long term consequences of a shift towards corporate landlords over 'human' landlords not an article that seem to suggest "we are making over half a million pounds per property and thats not good enough"

Reply to the comment left by "Barry Fitzpatrick" at "15/09/2015 - 12:01":

Hi Barry

Thanks for posting the link to Richard Dyson’s latest article. It certainly provides food for thought.

The landlord received rent of £315k, and paid interest of £225k, giving a taxable profit of £90k. Tax on this at 40% is £36k. He pays CGT at 28% on the gain of £1,039k, which is £291k, making a total of £327k in tax to HMRC.

The owner’s gain of £1,039k is tax free.
He paid £323k to the lender. This is £225k for the loan, and £98k interest over 25 years. The latter has cost £327 a month. The market rent is £1,050 a month.

If he had a lodger paying £354 a month, this would pay the mortgage interest and would be tax-free with rent a room relief at £4,250 (going up to £7,500 from 2016).

Apart from the stamp duty that the landlord also paid, the owner paid no tax to HMRC for this property. That is £327k less than the landlord.

I wonder where George Osborne got the idea that “The current tax system supports landlords over and above ordinary homeowners.”

Reply to the comment left by "Roger Rabbit" at "15/09/2015 - 14:16":

Hi Roger

According to ONS data on ITV’s website: http://www.itv.com/news/london/2014-07-15/the-rise-and-rise-of-london-house-prices-1986-to-2014/
the average house price in London increased by 500% in 25 years from 1989 to 2014 - from £82,000 to £492,000. This is more than the 347% increase in Richard’s article.

London prices are relevant because that is where FTB’s face the biggest difficulty, and is where the politicians and the media are concentrated. Richard was not predicting such an increase throughout the country.

Obviously, rents will increase over the next 25 years, which means that landlords will pay more income tax. Trying to guess what they will be would confuse the picture unnecessarily. The point of the article is that landlords pay taxes that owners don’t pay, in spite of George Osborne’s assertion.

However, I agree that focussing on the gain missed the point of the headline, which was about the fictional tax advantages of landlords.
He should have put the CGT amount of £291,057 in bold, not the net gain.

The gain is illusory anyway. If the owner wanted to buy an identical property he would have to pay £1,339k (plus stamp duty and fees). So would the landlord, but he would have less money available because of the CGT.

The CGT is a tax on inflation. Before Gordon Brown became Chancellor the gains were reduced by an allowance for inflation. He replaced it with Taper Relief in 1998, which reduced the amount of taxable gain depending on how many years the property had been owned. The maximum relief was given after 10 years. When the scheme had run for 10 years it was scrapped. Now landlords receive no allowance for inflation.

Thanks app landlord. Yes a landlord used to get a form of inflation allowance. Now a landlord can potentially pay capital gains tax on a real term loss

I understand that London gains over the last 25 years have been very high but London was a special case. It went from an excess of Homes (due to a population crash post ww2) to a very rapid shortage of homes in the 2000s-now. I dont think that can be repeated again over the next 25 years

For my own assumptions I use a figure of 1% above inflation, So in real terms I suspect property will be worth ~30% more in 25 years time. Of course any figure is a guess and a lot can effect the outcome. Few in the 1980s expected London population fortunes to see such an abrupt and rapid change

Reply to the comment left by "Mark Shine" at "14/09/2015 - 22:57":

Thanks Mark, you are right. The forum is probably not the right place.

Re the Levy - that will not impact on the finance model so won't subdue to demand for BTL. Which I believe is the core objective rather than impact on all LLs. The fact it catches limited companies helps though I think there maybe tweaks in the future to capture them as well if their primary function is residential rentals.

The debate about tax advantages v's OO for me is not the key issue in terms of any perceived imbalance between BTL and OO. I think the key advantage is the ability to buy in the first place.

Earlier this year I considered buying a house to eventually live in using BTL finance because it was too expensive otherwise. I had just sold another house and had over £300k in cash. The house was £750K. To borrow the £500k on IO @ 2.99% was £1250 pcm and the rent would have been £2500. So I could do it.

But to borrow the £500k based on my actual earned income was impossible - as were the repayments. I didn't buy but not a 'moral decision' just felt I had enough debt and enough activity going on at the time so left it.

I know the deposit is a sticking point for those FTBs but some BTL'ers are pulling that from gains on other houses - bringing further advantages.

I have leveraged for short periods and I have gained from the model - but I did not think it was long term. I took advantage but never thought it was my right to do so. Selling a property each year and keeping one eye on the exit was always the plan.

The key for me is that this tax change STILL allows BTL the advantage at that initial point of sale - and that could a focus on changes moving forward....ie affordability factors based on gross annual income multiples etc.

So it's okay to be annoyed when this was announced - but it was the overall tone of entitlement that turned me away from advocating the petition.
I can't imagine what it must be like hearing of people buying a dozen properties when as a tenant or living at home in your 30's you can't buy your own home. So when this change happened I did moan for a few days - but then recognised why.

Those locked in may well get some dispensation.

Thx. Sent from my iPhone

Reply to the comment left by "S.E. Landlord" at "15/09/2015 - 16:39":

This is very true most of my rents have been static for 8 -10years