Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Ed Duncan" at "27/09/2015 - 17:37":

Sorry to hear it Ed but good on you for making the change and calling it what it is.

I too am going to increase rents... but for me it is a 35% increase in rents just to stand still with my earnings.

Reply to the comment left by "Mark Brown" at "27/09/2015 - 17:54":

Mark, if you genuinely believe you could increase rent by 35% then surely you would do that regardless of the tax grab?

When BBR fell from 5% to 0.5% did you reduce your rents pro rata?
.

Reply to the comment left by "Ros ." at "27/09/2015 - 14:13":

You would not be able to increase rents for benefit tenants the government already reduced the housing rate . They have now frozen for 4 years so the benefit people will be the first to be evicted.

I believe as an lone landlord you can't easily put up rents . In Edinburgh the increase is starting due to constant increases ; the legionaries testing , new metal fuse boards and additional smoke detection . Once the full market understands the tax the general equilibrium will move and rents will adjust to 35% higher than say 2014 rents

Reply to the comment left by "Mark Alexander" at "27/09/2015 - 17:58":

Great questions Mark...

No, I would not raise rents as you suggest. I am a businessman not an opportunistic gouger... BUT I will have to raise rents now.

There is a difference between choosing to raise rents and being forced to. I could not justify a 35% increase without the Tenant Tax but now have no choice.

Us landlords will each do our own thing and you have chosen to sell up & make people homeless - your choice I respect that and have said it is eminently sensible.

My choice is to allow my tenants the choice to use more of their money to live in my properties, go elsewhere or make themselves homeless. In defence of my choice - I will still have the home to offer to others who can and will pay the Tenant Tax. In your case - ho homes just homeless people.

As a matter of fact, because of differing status of mortgages and of houses, when rates fell - they did not all fall at the same time or by the same amount for me. It took a couple of years± and YES, I did think through all options.

a. Reduce rents -
saw no gain for my business and no harm leaving them as it was. It was a rates fall NOT a tenant income fall. Have I reduced rents for tenants who fall on hard times? - Very proudly - Yes!

b. Keep rents as are and pay down mortgages -
This option would reduce profits and thus reduce income tax but no gain to my business in real terms.... Maybe this was the best option in hindsight???

c. Keep rents as are increase them with inflation -
This allows one to spend all of the extra money on repairs and maintenance - give value to the tenants and make properties attractive... the best available. I knew interest rates at 0.5% will not last and we should all repairs the roof when the sun is shining.

d. Keep the money for myself -
That would mean paying more tax as I'd have a biggier income.. Huge downside is that that I knew it would not last but I'd get use to the income...

I went with C and so I have great roofs, great tenants and a good business and no problem at all passing on the Tenant tax if I am forced to do so. I do however still think it is very very wrong to tax in this way and discriminate in this way.

I have clear conscience on the choices I made and will have to make - even if it gives me a heavy heart.

Reply to the comment left by "Ed Duncan" at "27/09/2015 - 17:37":

Hi Ed

The 10 families have Natalie Bennett and Jeremy Corbyn to thank for suggesting such a brilliant solution to the shortage of affordable housing, and George Osborne for cynically adopting their socialist policy.

Latest missive from Martin and Co - still covering the story. Just for information as they're just sending out things like the results of the latest RLA survey and the call to arms by the NLA, which most of us have already seen. But at least they're spreading it, which is good.

http://www.martinco.com/news/2015/09/23/two-thirds-of-landlords-face-tax-bombshell-rla/?utm_campaign=mac-news-section&utm_source=hs_email&utm_medium=email&utm_content=22335931&_hsenc=p2ANqtz--Z3e0Q8JsXs74PP0aRemKnrw8ZNqC6z-QR6J_KzRwmuMGBiHjY1xslQUaCyI1G96A9TulsuuHcCsBzBXQtB_kW-bhkQg&_hsmi=22335931#.Vggqt5fcCig

http://www.martinco.com/news/2015/09/24/buy-to-let-reforms-will-push-most-landlords-into-high-rate-tax/?utm_campaign=mac-news-section&utm_source=hs_email&utm_medium=email&utm_content=22335931&_hsenc=p2ANqtz--cauiio3PFDsgmTeTGUW6gX4wLXKo7NV8H5sURtfRIrjy2fM9qRFlsXH_zbuZl67mVSDh2Umbz4QxsN2NwbFS827c6eg&_hsmi=22335931#.VggrzpfcCig

http://www.martinco.com/news/2015/09/25/nla-urges-landlords-to-lobby-parliament-over-tax-changes/?utm_campaign=mac-news-section&utm_source=hs_email&utm_medium=email&utm_content=22335931&_hsenc=p2ANqtz--eoD3J2yLzsmn6q4zP_pw6k1L9f14V2cqsI0j4sj_rngyTJBCnuAZ67KzqZKHMh9k42o6Z0gk4sgzh4vrfEzdXIY99Aw&_hsmi=22335931#.Vggr9pfcCig

Reply to the comment left by "Appalled Landlord" at "27/09/2015 - 18:45":

Brilliantly put Appalled! And they can also thank Shelter for demonising us so much that GO felt emboldened to propose the barmy-bonkers tax. Stupid government interference - look where it gets them.

Reply to the comment left by "KATHY MILLER" at "27/09/2015 - 18:03":

Sad Sad Sad - These people need to get themselves some inflatable boats and get out..,hang on that sounds familiar..... Seems their government is persecuting them. They should genuinely go to France or Ireland and seek asylum.

Ed Duncan is Right - social cleansing

Anyone who doesn't think Corbyn would be better for the country should pause a while. Not good for me but for the country... I think if this continues he has a very very good chance of getting a go at steering. I hate the thought but making people homeless by taxing them out of their homes.. that is feudal at best. One might think our Chancellor is the 18th Baronet (oh yea he is.... but not just yet he want to be PM 1st,,,,,)

I am not glib or gloating - it is truly truly truly sad.

I do think if we do the right thing & tell all tenants about the Tenant Tax they can have a chance to defend themselves and rise up and help the lobby. Or we can call it the clause 24, restriction to finance costs relieve for individual landlords that only affects 1 in 5 of the wealthiest landlords who already get the most generous tax treatment, & give our tenants an ore as they leave and we board up behind them

TENANT TAX - Save yourself!

The below is what I sent to my MP last Thursday:

'By Email only

Dear Mr Gauke

Thank you for seeing me in Tring on 27th August and for your follow up letter dated 8th September 2015.

1. Effect of Clause 24 on my business:

As one your constituents I would like to explain in simple terms how Clause 24 will directly affect my business:

I am a higher rate tax payer whose last year’s real profits (2013/14) were £71,748 with a tax bill of £18,521. Assuming there is not a rise in base interest rates (which of course there may well be) by 20/21 my real profits will be the same but my tax bill will have increased to £47,406, by which time I will be a 45% tax rate payer and lose my personal allowance.

In simple terms I will have to pay a £29k annual levy in addition to what HMRC are normally due. This is because my properties are encumbered and because I was advised by my accountant to run my business as a sole trader rather than a LTD company.

My LTV (loan to value) across my portfolio is under 50%, but Clause 24 will cripple my business.

2. ‘Level the Playing Field’:

A lot of the Governments rhetoric has been focused on ‘levelling the playing field’ between owner occupiers and residential landlords, particularly the wealthier ones.

Clause 24 will not achieve that as a large proportion of residential landlord businesses will be unaffected, as the majority of landlords (which includes all those unencumbered and all those incorporated) will be completely unaffected by Clause 24. Although some of that group may choose to take advantage of the upward pressure on rental values that is likely to ensue as a result of a lot of medium sized sole trading yet very professional landlord businesses being unfairly penalised. Existing or new LTD company landlords are also likely to purchase tenanted properties from non-incorporated landlord businesses forced to exit the sector.

3. An alternative option to consider:

If the Government genuinely wish to (1) level the playing field and (2) generate more tax from the PRS, surely a fairer way would be to introduce a Non Primary Residential property levy which could be applied to ALL residential properties that are not used as the owners primary residence? A simple formula could be devised so that the amount of the levy could be based on actual or perceived rental value per unit which ever was higher. If the average amount was £250 per unit per annum this could generate far higher revenue for HMT and HMRC and would be infinitely fairer than Clause 24.

4. Institutional players looking to capitalise:

I have seen many reports that suggest that larger institutions wish to get involved in the PRS. During our August meeting in Tring I asked you if you are expecting institutions to pick up the slack as a result of the chaos that Clause 24 will create in the London PRS to which you indicated that you hoped so.

If institutional investors do want to finance the building of new housing for rental purposes then as long as they produce quality residential accommodation that is appropriate for the short and longer term needs this may help the housing crisis the country is facing. So personally I do not have a problem with that, assuming that Clause 24 is scrapped or substantially altered to make it fair and logical.

5. Risk to Financial Stability:

I would suggest giving more powers to BoE or another independent body to advise and consult. IF after consultation they conclude that residential landlord businesses are a genuine risk to financial stability, then the phasing in of repayment only Buy To Let mortgages for both non-incorporated AND incorporated LLs for all or part of a mortgage (eg above a certain loan to value) is surely a more sensible approach to tackle this?

http://www.bankofengland.co.uk/publications/Documents/fsr/2015/fsr37sec4.pdf

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/11712384/Buy-to-let-could-pose-a-threat-to-UK-economy-warns-Bank-of-England.html

6. ‘Cash in hand’ payments to tradesman:

As a residential landlord it obviously makes no sense to do anything other than to obtain receipts for maintenance works undertaken and therefore pay the VAT. I also do this for works at my home. However the majority of home owners do not do this and are therefore effectively stealing tax from HMRC.

Given that there is (a) an estimated £2billion per annum that the treasury loses via owner occupier and tradesman ‘cash in hand’ deals and (b) the government’s desire to level the playing field, I am also interested to hear what proposals HMT have regarding closing down that particular gaping hole that is very much related to property ownership?

http://www.dailymail.co.uk/news/article-2623896/80-admit-pay-workmen-cash-hand-Failure-tradesmen-declare-earnings-said-cost-economy-2bn-year.html

https://yougov.co.uk/news/2012/08/09/have-you-paid-cash-hand/

I am looking forward to hearing your comments on the above.

Yours Sincerely'