Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Monty Bodkin" at "14/07/2015 - 12:29":

Monty,

If you do not declare, mortgage then you are faced with 2 fundamental problems:

A) You will not be entitled to 20% tax relief therefore you will not get a penny in relief....in which case Revenue would consider you bigger fool than they originally thought you were. (When you purchased properties).

B) You would be signing a false declaration which would land you in prison.

Reply to the comment left by "Appalled Landlord" at "14/07/2015 - 12:33":

Appalled Landlord, you are right, I have missed it in haste but I am sure you'll agree that, principle that, I have understanding of forthcoming legislation.

There are some who have failed to understand or are in denial.

Hi everyone, this is a most disturbing time for us all, i sent an email to Megan Shaw at HMRC whose name is on the HMRC documents posted for the restricting of mortgage relief, i have received a response on how this would work. I also had a question on considering we would be taxed on virtual non existent profit how would this effect Child support payments and other ex wife maintenance payments, HMRC said we dont know , i was then asked how is child support payments calculated , i responded its calculated as a percentage of total income, they responded "oh, i will bring this up with the treasury to see how this can be remedied"
Something tells me i dont think this is going to get through parliament...
anyway here are the full workings:

Dear Mr Shah,

Many thanks for your email.

After April 2020 (when the restriction will be fully implemented) landlords that incur interest (and other associated finance costs) on residential properties that they let will need to calculate their tax differently. You will no longer be able to deduct interest from your rental income to arrive at your taxable profits, you will instead receive a reduction from your income tax liability equivalent to 20% of those interest costs. If that means you become a higher rate taxpayer (or you were anyway) then you will have to pay more tax as a result of this change. Please see the example below:

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
Less Personal Allowance (11,000) Less Personal Allowance (11,000)
Tax due on 30,200 Tax due on 41,000
Tax at 40% 3,600
Tax @ 20% 6,040 Tax @ 20% 6,400
Total Tax 6,040 Total Tax 10,000
Less Finance Costs @ 20% (2,160)
Final Tax 6,040 Final Tax 7,840

Please do get in touch if that doesn't clarify the mechanism.

The legislation implementing this change will be published in tomorrow's Finance Bill. The Bill is subject to parliamentary scrutiny and so there are no guarantees as to what will become law before the Bill receives Royal Assent in Autumn.

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

I am hoping the HMRC software will allow us to put in the figures and do the calculation when submitting online as it does now. However it would be good to understand it....so far I am very confused.

Hmm ....Child benefit will dissappear, working family tax credits as well, probably child maintenance payments will be increased if based on % of declared income ...along with being propelled into the 100-120K zone for some where basic nil rate allowance is lost and replaced with a tax on profits never realised ...... when tax payers have their profits artificially elevated ....

..but if you happen to have ltd status none of this will apply

Whoever dreamt this nonsense up needs publicly flogging

i know a mother who is not a tax payer , who has minimal income who claims carers allowance for her son who is disabled. She has a flat that she lets out, Mort int £5640 ...thing is carers allowance rules mean that you can only work x hrs and earn £110(?) per week ....add in her interest to her meagre profit and bye bye carers allowance ....

...oh my...

Reply to the comment left by "Gary Mason" at "14/07/2015 - 12:36":

A) You will not be entitled to 20% tax relief therefore you will not get a penny in relief.

In your example, you would be paying more than if you didn't claim any relief at all.

B) You would be signing a false declaration which would land you in prison.

If there is no legal requirement to declare the mortgage interest, why would you land in prison?

in principle, I have understanding of forthcoming legislation.

I agree, you do, but this is still very much in flux and not fully understood even by those introducing it. Please don't let your passion for this lead you to becoming unintentionally aggressive or patronising to other posters.

Reply to the comment left by "syed shah" at "12/07/2015 - 13:32":

I have a question i have heard on this forum it states you have to determine whether you are a basic rate tax payer or higher if the rules apply, i am having a difficult time understanding this, Could someone please help, so if my day job i have a 20k salary and my property income is 150k per year , interest of 70,000 and costs of 40,000., would the rules apply to me, ? i dont understand if the rule applies as you have to know your tax band first before property rental comes into play ? Could someone please help,

Syed for tax purposes, your income is as follows:

£20000 your employment. £70000 Interest and £40000 therefore total income = £130K

Reply to the comment left by "Michael Barnes" at "14/07/2015 - 09:12":

If the tax can be levied on lettings profit as one of the options, for all those panicking because they don't make one, there will be nothing to pay.

Reply to the comment left by "Monty Bodkin" at "14/07/2015 - 13:01":

Monty,

Would you do yourself a justice, if you did not declare mortgage as you would not be able to reclaim 20% relief which would cost you thousands of more £'s than if you actually declared it.

I'm sorry if I offended you..it was not my intention to so.