Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "steve p" at "15/10/2015 - 16:44":

I dont think so, I ask my accountant when it first was announced what if I got a overdraft and paid for my BTL mortgages .

The answer was no as it was on all finance interest involving BTL

this conclusion was in property tax insider

It was clear from the chancellors budget speech and supporting documentation in July 2015 that he sought to deter " tax-motivated incorporations " ie where a business has converted into a limited company in order to benefit from a more favourable tax regime.
The increase in they effective rate of income tax on dividends was part of this approach. And yet, in the same budget, he has put a very substantial proportion of res property landlords in such an invidious position that, for some, incorporation may be the only route to avoiding a significant increase in tax costs and perhaps even insolvency.

The four year phasing in period it not for our benefit another lie from GO. It is to give the big boys time to build the rental homes.

We have been sacrificed to get them to come in and build. Who knows what deals the government have done behind the scenes, look at the lack of debate on clause 24 .

Anybody able to explain what this actually means please

The tax reduction will be calculated as 20% of the lower of
*The finance costs incurred
*The rental profits of the year,or
*The total income that exceeds the individuals personal allowance in the tax year

Reply to the comment left by "Mark Brown" at "15/10/2015 - 00:41":

@Mark

Looks like Brandon Lewis has already coined the "Tenant Tax"

https://www.landlordtoday.co.uk/breaking-news/2015/10/rla-landlord-licensing-not-needed

Taken from: http://www.propertyinvestmentproject.co.uk/blog/how-to-be-a-sensible-low-risk-landlord/

‘I’ve already taken note of a few fellow landlords showing obvious signs of concern and desperation because of the much anticipated troubling times ahead. I’ve also glanced over at the bitter assholes anti-landlord brigade rubbing their mitts together in joyful anticipation of empires falling and landlords suffering. They’re pissing their crusty pants with excitement like it’s Christmas Eve.’

@ Jon Pipllman - I assume the author specifically meant your ‘other forum’? The same forum that yesterday I suggested was a ’manipulative, very simple minded & often offensive forum’? You rejected that analysis. Later some of your ‘other forum’ members (the self-appointed C24 specialists there) also appeared to claim that they cannot possibly understand how copying and pasting very selective articles or quotes (without ever considering that there may possibly be other consequences due to C24 other than the one they dream of) and a handful of the more aggressive members continually hijacking the comments sections in every single online news article or blog that relates to C24…. could possibly be construed as being manipulative?

Reply to the comment left by "ray selley" at "15/10/2015 - 18:24":

Hi Ray

The purpose is to stop the relief being given on a figure that is higher than the amount that the tax is calculated on. So the finance costs are compared to two other figures.

The first comparison is against the deemed rental profit. This only comes into effect when a real loss is made. Suppose you make a real loss of £4,000 after paying finance costs of £20,000. HMRC will deem you to have made a profit of £16,000 and add this to your other income. They will then deduct the personal allowance (nil rate band) of £10,600 and calculate the tax due on the remainder. Then they will deduct “relief”, but at 20% of the £16,000 only, not of the £20,000, otherwise the relief would be calculated on a higher figure than the tax was. The difference of £4,000 is excess finance costs. HMRC’s Policy paper says excess finance costs may be carried forward to following years (and “relieved” then, if you make enough profit) if the tax reduction has been limited to 20% of the profits of the property business in the tax year.

The second comparison can come into play whether you make a real profit or a real loss.

If your other income (except savings income and dividend income), is less than the personal allowance of £10,600, then part of the latter will be deducted from your deemed profit, reducing the tax calculated on it. So the relief is calculated on the same lower figure.

However, in this case if a real loss is made, HMRC do not say anything about carrying excess finance costs forward to following years.

Thankyou Appalled all clear now

The best way to deal with these tax changes is to switch to short term letting like holiday apartments, B&B, and serviced apartments.

My higher quality properties will be used for short term lettings and the rest perhaps continue with BTL. My goal is to at least maintain my current level of profitability after tax.

If you did this you could perhaps triple your income and still get full relief on the loans.

Yes it would be more labor intensive but it is an option worth considering as it would offer many landlords an escape route.

It's best to start making these changes early. At present I'm upgrading my properties so I can compete with the hotels.

I am going to be replacing my LHA tenants with holiday makers so the homelessness problem will get much worse for the poor.Interesting to see how the Government responds when the supply of rental property diminishes.

Hi Bill, Short term lets (B&Bs & Holiday Lets) are not just more labor intensive! They got VAT (20% of rental rate) and Rates