Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Roanch 21" at "24/09/2015 - 10:04":

Absolutely! The problem is that landlords have been scapegoated so much in recent years that most people don't consider the facts and just use any excuse to blame landlords for their own bad luck in life.... and in some cases lack of creativity and effort to get ahead in life.

Just given myself a very nasty shock. If BBR hits 4% (all other things being equal) under the proposals if BBR hits 3% my rate of tax on my rental income hits 73%, at 3.5% it hits 108%, and at 4% it hits 276%!!!!!!
(BTW under the current rules it would be 20% irrespective of BBR).

This has got to be a wake up call to ALL Landlords especially those only paying basic rate tax who feel they are "OK" with this change in the rules. GO has cleverly introduced it now, knowing that many Landlords will get badly burnt in a couple of years time when BBR goes up.

OK this is just my personal circumstances, but when my mortgages are at either 1.49% or 1.75% over BBR, how many LLs are on higher rates than me. And I will be increasing rents in the meantime.

Reply to the comment left by "Roanch 21" at "24/09/2015 - 10:04":

Roanch,

Good research. The biggest irony is that, people who do come up with these theories (comparing shares with properties) are young graduates themselves who like to get on to property ladder but find that grapes are sour.

They throw as much mud as they can with a hope that some will stick. When these ideas are submitted to treasury annoyingly they do not conduct any reserach but jump on any bandwagon.

When subsequetly treasury is asked what research have you carried out...their ordinary response is "we have not".

If you read recent David Price's post few pages back, where he requested some info relating to Commercial and Non Commercial landlords they did not hold any data.This is telling and alarming that they would pluck figures from the air such as:

1 in 5 Landlords would be affected by new legislation! What a load of bo****ks

Reply to the comment left by "Saeef Khan" at "24/09/2015 - 11:02":

I am still waiting for answers to my FoI request put in at the same time as David Price's. The time limit for my response is 2nd October (25 days).

Reply to the comment left by "Barry Fitzpatrick" at "24/09/2015 - 11:05":

LOL Barry. You might be in for longer wait for the answer you might be looking for.

I have an acquaintance who pays child maintenance based on her income. If landlords are to be taxed on turnover rather than income then her contribution could increase dramatically, in addition to the extra tax. I am not aware of the rules concerning child maintenance but there seems to be yet another potential trap for the unwary.

Reply to the comment left by "David Price" at "24/09/2015 - 11:14":

Very good point David. Not to mention the loss of child benefit.

Megan Shaw from HMRC has confirmed that Child Benefit will be lost if your taxable income goes over the £50k. I'm not sure how to get her email to format nicely on here but it is copied below. Her example shows someone with a £40k job and a modest £1.2k BTL profit. At the moment they are under £50k so keep their child Benefit. However the new turnover tax means their taxable will be over £50k so they will no longer be entitled to full Child Benefit!

Basically if you have kids just add your BTL finance costs to any earned or other income to give your taxable income. If it's over £50 k you will have to pay another tax on top of income tax called Higher Income Child Benefit Charge. If the figure is over £60k you will have to pay ALL your child benefit back so that's an extra tax charge of £2500 pa if you have 3 kids like me.

Fairer / level playing field? Really?

Dear Roanch21
Many thanks for your email and sorry for the delayed response.

This change alters the way that your total income subject to tax is calculated, so this will affect whether some people are subject to the High Income Child Benefit Charge.

Here is an example to demonstrate the change:

Megan Shaw
Product Owner - Property Income & REITs
HMRC, Room 3/64, 100 Parliament Street, London, SW1A 2BQ
03000 585628

Before Restriction (16-17)
£
After restriction (20-21)
£

Salary
40,000
Salary
40,000

Property income 15,300
Property income 15,300

Less Other costs (3,300)
Less Other costs (3,300)

Less Finance costs (10,800)
Less Finance costs (0)

Property profits
1,200
Property profits
12,000

Taxable income
41,200
Taxable Income
52,000

http://www.propertyindustryeye.com/tax-bombshell-awaiting-six-out-of-ten-private-landlords/

Getting better coverage everyday ...we need a lot more people to wake up and start shouting

The Government has responded to the petition about dividend tax reform. Here is the response in full.

The Government is committed to supporting entrepreneurs and a fair tax system. Dividend tax reform allows further cuts in Corporation Tax and reduces the incentives for tax motivated incorporations.

The Government is fully committed to supporting business and entrepreneurship. As set out at the Summer Budget 2015, the Government believes that one of the best ways to support growth and enterprise in the UK is through lower and more competitive Corporation Tax rates.

Owners of small companies will also benefit from a range of other measures announced at the Summer Budget, including an increase in the National Insurance Employment Allowance to £3,000 from April 2016 and a permanent increase to the Annual Investment Allowance to £200,000 from January 2016. They will also pay less tax as a result of the increases to the tax-free Personal Allowance to £11,000 and to the Higher Rate Threshold to £43,000 in April 2016. We also have a commitment to go much further, taking the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by the end of this Parliament.

However, it is not possible to continue to reduce the Corporation Tax rate without looking at the overall balance of the tax system, including taxation of dividends. Lowering the Corporation Tax rate without action elsewhere increases incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill (also known as tax motivated incorporation). Therefore the Government is reforming dividend taxation. These reforms, which will also simplify the dividend tax system, will significantly reduce the incentives for people to set up a company and pay themselves through dividends rather than wages simply to reduce their tax bill. Taxpayers and the Exchequer will now be £500 million better off as result of reduced incentives for tax motivated incorporation. Those who choose to work through a company continue to pay lower rates of tax than the employed or self-employed. But the reforms move the overall tax rates for the self-employed and those incorporated closer together, making the system fairer overall.

HM Treasury

The important bit for us is that the Government is saying that they wish to reduce the incentives for tax motivated incorporations. I have no doubt that tax motivated incorporations will happen if the tax changes for individual landlords proceed.

Mixed messages from the Government.

If they really want to stop tax motivated incorporations, they should scrap the buy to let tax grab.