Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Lisa Stux" at "06/10/2015 - 12:52":

Hi Lisa.
I wrote to my sympathetic Labour MP 5 times, but it was only when I saw him and explained it all that he understood. What worked was showing him the tax calculation and the effect Clause 24 would have on me, how I could go into a loss but be deemed to be a high earner, have nothing to live on etc. and the newspaper article by Richard Dyson - 'the Alice in Wonderland' one about the bonkers tax you'd expect in a third world country from a lunatic dictator. Since then he has been helpful and done some liaison and given me the names of some Labour MPs I should target.
The message is that they only seem to take it seriously when you see them face-to-face (and sometimes not even then! But you have a much better chance).

ML: that's some very useful research. We need to think carefully about how to write to them - I'm thinking something along the lines of how they will understand the nature of the business, which many people do not - thinking it's hands-off etc. and how we really need someone to speak up for us and be a voice of reason in Parliament. The problem will be the issue of 'conflict of interest.'

Reply to the comment left by "Manchester Landlord" at "06/10/2015 - 11:50":

Well done ML.
All Conservatives except Michelle Thomas & Tasmin Ahmed-Sheikh who are the Scottish National Party, Michael Meacher who is Labour & Richard Benyon who is a Lib Dem.
In your experience (question directed to Mark Alexander) how best should we write to these MP's that Manchester Landlord found to be BTL owners of 4 or more properties?

Received the following this morning:

'I refer to your request, which was received on 5 September 2015, for the following information:

FOI 2614/15: When HMRC produced its impact report on the proposal to restrict finance cost relief for individual landlords, how many individual landlords in the UK did HMRC assume are currently higher rate tax payers and how many properties did HMRC assume are currently owned by these landlords?

I am answering under the terms of the Freedom of Information Act 2000 (FOIA). Following a search of our paper and electronic records, I have established that HMRC holds the information that you requested.

HMRC estimate that there were 330,000 landlords, who were higher rate taxpayers, owning approximately 760,000 properties who claimed finance costs against income from property in 2012/13.

These individuals have been allocated to a tax band based on their total income in 2012/13 using tax rate and thresholds for that year. This was the most complete and reliable information available at the time of producing the impact report.

The figures provided are based on information available in the property pages of the main Self Assessment tax return (SA105), excluding individuals with property income from furnished holiday lets only. This does not equate to the total number of landlords affected by the finance costs measure. It will include owners of commercial property that are not affected by the measure, and will exclude tax payers who complete the short Self Assessment tax return (SA200).'

And we received this one...

I refer to your request, which was received on 27 August 2015, for the following information:

This is a request for information under the Freedom of Information Act 2000. The request is in connection with the Government’s plans to restrict finance cost relief for individual landlords. I would like information on the evidence that HMRC has that landlords are competing with first time buyers and denying first time buyers the opportunity to get on the housing ladder

Following a search of our paper and electronic records, I have established that HMRC does not hold the information you requested.
The Summer Budget 2015 stated that the current tax system supports landlords over and above ordinary homeowners. Landlords currently get relief for loan interest incurred when calculating the tax due on their rental income. Mortgage Interest Relief was withdrawn from homeowners 15 years ago. However, some landlords currently receive this relief for interest at the higher rate or additional rate of income tax (40% and 45% respectively). The ability to obtain this relief puts investing in a rental property at an advantage. The Government therefore announced that relief for loan interest for individual landlords will be restricted to the basic rate of income tax (20%).

I have posted on GO's Facebook page the following:

You did not mention Clause 24, Restriction of Interest Relief...specifically and only for non incorporated landlords.
You did not mention this new tax raising method in your manifesto.
You did not mention that it would push many independent landlords into a higher tax bracket even though they will not be earning any more.
You did not mention that the only way most landlords will be able to pay the extra tax will be either by raising rents...it is thought by about 30%, or by disposing of their properties, thereby reducing the number of properties to rent, which in itself will put up rents.
You did not mention that in effect this is a tax on tenants.
You did not mention that the way it was worded in the Summer Budget has hidden its true impact from a lot of landlords.

I have been a Conservative voter all my life.
I have never claimed benefits. I have always provided for myself, throughout a divorce, single parenthood and cancer. The purchase of my properties has been worked for over years. Many of those years as a self employed person working 60 hour weeks. These properties are my pension. Apart from the State Pension I have no other.
By going against all normal ideas of taxation i.e. tax net profit after all expenses incurred on making that profit you will probably ensure that I will, at the very least, have to stop providing homes, and possibly go bankrupt. I will then be claiming all those benefits I have not needed in the past.
What will this have achieved? higher rents, more homelessness, more benefit claims, more bankruptcies, less tax gathering (from me at least).
If this Clause 24 passes into law I will never again vote Conservative. It is against all I believed you stand for.

Reply to the comment left by "Lisa Stux" at "06/10/2015 - 15:31":

Well said! Let's hope these nuggets start listening!

Here is mine:

I too am a party member, owner of a small business and a small portfolio landlord. I have voted and worked for the Conservative party all my life, from when I was a YC chairman in Chesham and Amersham while my late father was Sir Ian, later Lord, Gilmour's constituency chairman.

Like Lisette, above, I have tried to make provision for my own retirement, which is due to happen in less than 10 years, by building up a small business providing homes for people who are not in a position to buy their own. You have not only sabotaged this effort by your Clause 24 but add insult to injury by imposing a 7.5% tax rise on the profits that I collect AFTER my company has paid Corporation Tax on its profits.

You have betrayed me and many natural Conservatives like me twice in a single budget. I hope you are ashamed of what you have done.

Reply to the comment left by "Jerry Jones" at "06/10/2015 - 08:39":

I commented on George Osborne's Facebook page as follows ....

If 1 in 5 landlords have to sell due to Restriction on Finance Cost Relief that's all well and good for the owner occupiers but where are the displaced tenants going to live if they are unable to get a mortgage? I suspect the 20% of landlord affected will also be the ones with the most properties. If you apply the Pareto Theory (80/20 rule) then you could see a massive shrinkage in PRS stock. Again that's great news to satisfy pent up demand from owner occupiers but what will the cost be to the welfare system in terms of B&B style emergency accommodation for all those tenants who are made homeless and can't find anywhere else within budget to live?
.

Reply to the comment left by "Jerry Jones" at "06/10/2015 - 08:39":

Thanks Jerry

I have posted on Osborne's Facebook page:

On 29 April the PM pledged that there would be no increase in income tax for 5 years, full stop. On 8 July George Osborne made a liar of the PM by adopting a Socialist policy that was in the Manifesto of only one Party, the naïve Greens. He announced that he would disallow mortgage interest from 2017 for landlords who bought properties in their own name (but not for those who bought through companies with the intention of reducing their tax rate).

If this is implemented, individual landlords will pay tax on turnover rather than on income. Their total income will be artificially inflated by the finance costs. Some will be moved from the basic rate into the higher rate band.

The tax may exceed the real profit. It will be payable even when a real loss is made, making the effective rate infinite. It will have to be paid out of other income, if any, or savings, or else HMRC will bankrupt them.

This is tantamount to a levy on finance costs. Like all levies, it will be borne by the consumers – the tenants. Rents will go up except for tenants on housing benefit - they will be evicted and moved to B&Bs at greater cost.

Landlords who have had the same tenants for several years without changing the rent have already started to increase it. Others have started to issue eviction notices. This process will accelerate as the many landlords who are still oblivious of what George Osborne has in store for them become aware of it.

Money raised by this levy will have to be spent on the increased cost of housing the greater number of homeless people in temporary accommodation. The result will be inflation of housing costs and of the welfare bill. It will be a brilliant success story for the Premiership candidate!

http://johnredwoodsdiary.com/2015/09/23/why-rent-controls-do-not-work/