Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Saeef Khan" at "20/09/2015 - 14:56":

I assume when he says 'tax property more' he is referring to taxes on owner-occupied housing, as 'experts' know that this is necessary and that it is the lack of taxes on owner-occupied housing that has largely contributed to house prices increasing (added to the housing shortage and low interest rates).
I would have preferred it when he mentions rents averaging £900, if he had said this was skewed and that the median was closer to £500, and also if he had said that many private landlords charge similar affordable rents to social housing providers all over the country, but I will be writing to him to point this out and maybe he'll do a follow-up article to this effect at some point.

Reply to the comment left by "Ros ." at "20/09/2015 - 12:41":

British banks have become an acute exemplar of a global trend, directing as much as 85% of all their lending to real estate, and driving property prices to incredible levels.

Tax the bankers more and leave us alone!

Restricting mortgage interest relief for buy-to-let landlords will curb short-term lending in the sector and will slow house price growth, Moody’s said

It was announced in the Summer Budget that tax relief will be restricted for wealthier landlords, down from between 40 per cent and 45 per cent currently to 20 per cent for all individuals by April 2020.

Emily Rombeau, an analyst at Moody’s, stated the government’s decision to restrict buy-to-let mortgage interest relief reflects a willingness to put investors and owner-occupied borrowers on a more level playing field, given that the latter cannot claim tax relief on their mortgages.

She argued that first-time buyers’ affordability has declined, as they struggle to get on to the property ladder.

“Affordability constraints and demographic changes have increased the share of privately rented housing - this sector’s evolution has strongly contributed to the rapid growth of the BTL sector in recent years.

“Repeat issuers and new players will support a robust pipeline of buy-to-let residential mortgage-backed security deals this year. Issuance for this segment has accounted for 25.6 per cent of total UK RMBS issuance so far this year, up from 10.2 per cent in 2014,” Ms Rombeau added.

The latest Council of Mortgage Lenders’ data showed that buy-to-let continued to grow year-on-year - although it was flat month-on-month - with remortgaging up 36 per cent and house purchase up 20 per cent.

Moody’s forecasted that over the coming months, reduced demand for buy-to-let properties will soften UK house price growth. Despite this prediction, Moody’s stated UK house prices will still increase by up to 5 per cent in 2015, albeit at a slower pace than in 2014.

Ms Rombeau added: “Notwithstanding the softening in house price growth, the risk of an immediate house price decrease is limited, given the housing shortage and the economic recovery.”

David Whittaker, managing director of Mortgages for Business, told FTAdviser that the government has taken a political decision to ‘rein in’ the buy-to-let sector, which will have made up approaching 20 per cent of new domestic mortgage lending in the first half of 2015.

“We do not consider that the means adopted is either fair or likely to be very effective, since it only affects individual investors, with mortgages held within limited companies being unaffected by the proposed change.

“Buy-to-let is a long-term investment supported by lenders offering mortgages for the long term – in no sense is this ‘short-term lending’ as stated by Moody’s.

“Ultimately the landlord’s cost of borrowing is paid for by the tenants (out of taxed income) and if the effect of taxation changes is to push up landlords costs then, in a market constrained by the supply of rental properties, there is likely to be an increase in rental costs to tenants.”
While he admitted there will be some reduction in the demand for new properties by individual buy-to-let investors, Mr Whittaker said this is unlikely to have a significant effect on house price inflation.

“Doubtless there will be a windfall for the exchequer over the next two years as many buy-to-let investors will choose to move their properties into limited companies – but will have to pay stamp duty in order to do so.”

John Heron, managing director of Paragon Mortgages, commented that as the proposed tax changes are being phased in over a six year period, they have seen no impact in the short-term nor are aware of any impact across the market as a whole.

“We don’t quite understand the level-playing field argument, landlords already pay capital gains tax on any increase in the value of the property upon sale, whereas it is free of CGT for homeowners.

“It seems that landlords are being made a scapegoat here for wider failings in the housing market, particularly for affordability constraints which are essentially driven by a shortage in the supply of quality housing.”

Ray Boulger, senior technical manager for John Charcol, previously told FTAdviser that the Budget changes will force lenders to reassess their affordability calculation for buy-to-let mortgages, adding that higher rate taxpayers will see a “very significant” impact on their overall costs.

peter.walker@ft.com

http://www.arbuthnotlatham.co.uk/Upload/file/070815%20Buy-To-Let%20research%20note.pdf

The tax system is unjust, Mr Howker argued, and has underpinned the meteoric rise of buy-to-let investment and driven house price inflation higher.
He said: ‘Economically, buy-to-let investors should not imagine they are small-business owners. They are much less useful to the economy, rarely employing anyone who would not be employed by owner-occupiers to service their homes and deriving their income from gambling on house price rises.
‘Simply because these speculations have, in recent years, paid off does not make them the work of proper business.’
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The evidence gathered so far suggests that the impact of BTL investors on the housing market depends on the cycle. In a market where properties take a long time to sell, BTL investors can play a helpful role as buyers of last resort and contribute to market clearing by accelerating transactions. In a market where prices are already going up, BTL investors obtain lower discounts and could put additional pressure on property valuations. We are still far from the last word on the effects of BTL, but the available micro data are greatly improving our understanding of this part of the housing market.

If BTL get a discount this will be a lower price showing for the valuers for their valuations ?

http://bankunderground.co.uk/2015/07/21/five-facts-about-buy-to-let/

These changes will affect only those individuals who are liable to higher or top rates of income tax. The proposal indicates that it will apply only to individual property owners and it remains to be seen whether the rules will also apply to properties owned through trusts and other entities which pay income tax on rents. UK companies letting residential property, which are subject to corporation tax on their profits, would not seem to be affected. This creates a potential mismatch in the treatment of loan interest for different forms of property business and, as such, ought to be a consideration when assessing the ownership structure of such properties. When assessing how properties are held it will also be necessary to consider the changes announced in respect to the taxation of dividends.

AW1983
February 19, 2014 at 5:14 pm
A solution to house prices and tax benefits:

1) Reform CGT so that all people with more than one property are assumed at the point of sale to be selling a second property so they cannot flip between properties;

2) Force landlords to pay 90% of the council tax on all their properties. Implement rent controls to ensure compliance;

3) Raise interest rates by 0.5% each quarter until they reach 3% to offer a return on other investments;

4) Tax rental returns in the same way as dividends;

5) Treat property like any other investment. Limit gearing (lending to buy stuff – oddly most fund managers can’t gear as much in their management of an investment fund as a 22 year old with a £7,500 deposit can) and force banks to hold a capital buffer over and above the collateral held in the deeds of the house to make lending large mortgages less attractive.

Mortgage interest could continue to be offset against returns, but only to the same extent as other investments. If we could simply make property as liable to tax as securities, it would immediately be less attractive and encourage investment in other areas. That;s what most of the western world desperately needs.

Government refuses buy-to-let landlords’ one-off mortgage tax relief debate

It’s not been the best of weeks for landlords. First of all, as Steven Glicher accountants mentioned in an earlier article in August, landlords were specifically targeted by Chancellor, George Osborne, in the Summer Budget as part of his strategy to “level the playing field” between renting and owning. Now, it appears, any lingering hopes landlords may have held have been quashed by the government with the announcement that they will not be allowed to force an emergency debate in parliament under the online petition rules. So what exactly is going on?

Well, in the Summer Budget, Mr Osborne announced several measures which directly impacted on the livelihoods’ of buy-to-let landlords: firstly, the removal of the wear and tear allowance, and secondly new restrictions to tax relief on mortgage interest, which would see mortgage relief withdrawn over a 4 year period from 2017 to the basic cap rate by 2012/21. Unsurprisingly the new proposed measures were not greeted favourably by buy-to-let landlords, and the group vowed to take action to fight the proposals.

Landlords therefore launched the ‘Say No to George’ campaign’ to force a one-off parliamentary debate on the issue. Through an online petition launched just over a week ago, landlords launched a motion to reverse proposals announced in the Summer Budget to restrict the tax relief landlords can claim on property finance costs to the basic rate of income tax. It certainly gained traction, as accountants knew it would. In fact it secured over 27,000 signatures in just over a week.

What did the petition ask of the government? Well, it stated:

“We operate as sole traders and incur costs in the course of running our business.”

“The planned restriction will unfairly target us by preventing us from offsetting costs in the same manner as other sole traders. We [therefore] ask that the planned restriction be reconsidered as it has unfair implications.”

Normally online petitions require 100,000-plus signatures to be considered for a parliamentary debate. As the petition had not reached the necessary levels, the refusal by government to call a debate was therefore hardly unexpected. So it came as no surprise that the recently-formed petitions committee has now told the group it will not recommend that the buy-to-let petition go further.

Was a lack of necessary signature numbers the only reason the petition was rejected? Well, actually no, it wasn’t. The committee discussed a range of petitions at its inaugural meeting on 8th September and noted that as the issue of the buy-to-let petition was in the Finance Bill and was already being debated in the House of Commons, an additional petition could not be accepted. Any petitioner could, the petitions committee argued, write directly to the Public Bill Committee to air their views, and could follow the Finance Bill debate in the House of Commons.

Since that decision any petitioner signing the ‘Say No to George’ campaign has received an email stating?

“Because the issue is currently being looked at in Parliament, the petitions committee decided not to take any further action on this petition. This Bill will be looked at by a Public Bill Committee – a group of MPs who go through a draft law in detail and debate it. The Public Bill Committee can receive views from the public now.”

If you are a buy-to-let landlord and are worried about the changes proposed in the Summer Budget, then give Steven Glicher accountants a call. We can discuss how the changes may impact on your tax position, and therefore your cashflow. We can also review your affairs and help you structure them in the most tax-efficient way that suits your needs. For further information call Steven Glicher accountants on 0161 4858007 or email info@stevenglicher.co.uk

Reply to the comment left by "KATHY MILLER" at "20/09/2015 - 16:55":

This is not correct...they have not rejected the petition. This petition has until 27 Of Jan 2016 to accumulate 100000 signatures then it may well be debated.