Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Lisa Stux" at "27/10/2015 - 19:07":

I take it that clause 24 will now be passed into law and given royal ascent.

Reply to the comment left by "Manchester Landlord" at "27/10/2015 - 19:39":

It seems so...I watched the Parliament Channel yesterday...the Speaker just zoomed through from 9ish to 24 and said that he believed they were all in agreement so the Ayes had it.

I'm assuming that was Clause 24 he was referring to....so apparently my MP, Chris Chope did not table any amendments, even though he wrote to me saying he might.

Whether checking Hansard would clarify what happened I 'm not sure.

I was speaking to someone the other day who is fighting HMRC about a VAT issue and has taken it to the EU.It would appear that the government tried to pull a fast one, and went against the rest of the EU (not dissimilar to Clause 24). He seems to be winning his case (all by himself!!). If we wanted to go that route it would need to be done fairly quickly in case the referendum takes us out of the EU.

The righteous indignation of Baroness Meacher on tax credits is well worth 9m of your time https://www.youtube.com/watch?v=d2zPvzQkeuA … pic.twitter.com/0XcZdgQwEI

Reply to the comment left by "Lisa Stux" at "27/10/2015 - 19:07":

Grayling claimed that Labour and the Lib Dems voted against the government last night out of revenge because they lost the election. He made the point when it was put to him that the government could have avoided defeat by introducing the tax credit cuts in the form of a bill, rather than as a statutory instrument (a piece of secondary legislation). He said:
I don’t think for a moment that the Lords would have done something different yesterday if it had been an amendment to a bill, or a bill, rather than a statutory instrument ... I think this is all about Labour and Liberal Democrat peers in the Lords who are unhappy that they lost the election, the Liberal Democrats, who have eight MPs and 100 peers, deciding they want to wreck the government’s programme.

Grayling’s answer is potentially misleading. If the tax credit changes had been in a bill designated as a non-money bill, the Lords could still have voted them down. But if the government had put them in a finance bill, the Lords would have had no power to alter them.

Reply to the comment left by "KATHY MILLER" at "27/10/2015 - 20:38":

Micheal Ellis MP knows full well that they would never have been elected if this cheating Government had included these Tax cuts and the destructive attack on landlords been in their manfesto. This is why a coalition works.

Buy-to-let tax is unfair and unworkable.

The Institute of Chartered Accountants in England & Wales (ICAEW) has slammed the chancellor’s new buy to let tax as “unreasonable and unworkable” and has warned of the negative outcomes of the tax, which they say will drive landlords out of business and harm to first-time buyers. The UK’s leading accounting professional body has condemned the new legislation stemming from the Summer Budget as “unthought-through” and predicts it will cause “extreme confusion”, as well as forcing some landlords out of business, distorting the lettings and housing market, and even making life harder for first-time buyers.

The Daily Telegraph has started a campaign against the new tax which they say was not consulted about, but is included unchanged, following appeals by the main landlord associations, within the Finance Bill, currently progressing through Parliament. Richard Dyson, writing in the Daily Telegraph: “You can hate landlords and lament the rise of buy-to-let as a favoured investment of the middle classes. But even if you do, you must surely also condemn the action of a chancellor who, out of nowhere, has announced the destruction of this asset class for all except the very rich.” The tax is planned to be phased in over a four year period starting April 2017 to 2020. It will gradually remove the ability of private landlords to offset the cost of their mortgage interest before arriving at a taxable profit, with the effect that, in some cases, landlords will be paying more tax than they make in profit. When announcing the new tax in his budget speech, the chancellor implied that the extra tax would hit only higher-earning landlords.

It is the case that every mortgaged landlord paying 40pc or 45pc tax will pay more, a lot more in some cases, but also some basic-rate taxpayers will be pushed into the higher rate band, therefore also paying more tax. In actual fact, the only buy-to-let investors who will not be hit are the very wealthy who buy property for cash, or those who, over the years, have paid down their mortgages. But many buy-to-let lenders, rather than paying down mortgages, have interest only loans, relying on capital appreciate to offset immediate costs and build wealth.

At the heart of the change is landlords’ eventual inability to deduct zero per cent of the cost of their mortgage interest from their rental income. Tax will instead be applied to the rent received, as opposed to now, what is left of the rent after the mortgage interest has been paid. In a recent article published in the Daily Telegraph the ICAEW points out that the new tax would hit the small property investor, those middle-class savers who have prudently added one or two buy-to-let properties to their pensions and other portfolios. Larger landlords and property businesses investing in residential property through a limited company will not be affected. Going against a time honour principle in the UK that all businesses claim tax relief on borrowings, George Osborne’s stated intention was to “create a more level playing field” between property investors and owner-occupiers who, as Mr Osborne said, do not enjoy tax relief on interest payments. Although those wealthy investors able to buy with cash, and having little or no mortgage, will escape the worst excesses, in what now appears a punitive tax regime, the ICAEW says the measure is basically unfair because it applies not just to new investments but to those buy-to-let investors’ with existing properties. The ICAEW said: “Far from being level, it leaves the playing field with a cliff edge in the middle,” “Taxpayers will have priced and borrowed according to the tax relief they expected, and these borrowing decisions would necessarily have a long timeline. Many will... not be able to restructure their debt.” Worked examples of the new tax are showing that under the new regime, some landlords will end up paying tax on zero income or actual losses.

The ICAEW said: “Landlords’ real losses will become ‘profits’ when the interest restriction is introduced.” In other cases some landlords would find themselves being pushed from the basic-rate tax bracket into the higher rate, or even the highest 45% band which could result in the family losing their child allowance as well. Tax credits would also be lost, “with no real economic change in income”, and it could also affect tax relief on pension contributions or the loss of the new 0pc savings income band. From 6 April 2015, there is to be a 0% income tax band for the first £5,000 of savings income. In previous years there has been a 10% ‘starting rate’ of tax for savings. All of this could apply in future simply because landlords are unable to offset their mortgage interest costs, and their “income” will suddenly appear higher – even though it has not changed. Whilst the measures may be popular with tenants and the general public, and may indeed have been prompted by much, some would say, unwarranted, bad publicity surrounding buy-to-let landlords, the ICAEW thinks it will exacerbate the property crisis and make life more difficult for first-time buyers.

“The interest relief restriction will favour cash buyers who want to buy to let and may increase the competition even more at the lower end of the property market, thereby increasing prices and hindering first-time buyers.”, ICAEW says. On the other had the real victims of this will be those high rate taxpayers who have built up substantial portfolios of rented property on the back of easily obtainable and relatively inexpensive credit – the buy to let mortgage. The changes will “make it exceptionally difficult for taxpayers to self-assess,” ICAEW warns. The introduction over a four-year period “will be very difficult” to calculate and “will require extensive record-keeping.

” Here is a worked example cited in the Daily Telegraph Article, where the landlord pays 40pc tax: NOW: Your buy-to-let earns £20,000 a year and the interest-only mortgage costs £13,000 a year. Tax is due on the difference or profit. So you pay tax on £7,000, meaning £2,800 for HMRC and £4,200 for you. 2020: Tax is now due on your full rental income of £20,000, less a tax credit equivalent to basic-rate tax on the interest. So you pay 40pc tax on £20,000 (ie £8,000), less the 20pc credit (20pc of £13,000 = £2,600), meaning £5,400 for HMRC and £1,600 for you. Your tax bill has therefore gone up by 93pc. With the potential and very likely increase in bank rate over the next year or so, the calculation looks quite different again: let’s say the rate increases pushing your mortgage interest to 15,000, while your rent remains at £20,000. You will have to pay £5,000 tax in this scenario, so your profit on your buy to let is zero.

Read more at: http://www.landlordzone.co.uk/uncategorized/buy-to-let-tax-is-unfair-and-unworkable

I have copied and pasted above from Landlordzone website, it is refreshing to see ICAEW are siding us.

Extract from a debate in Parliament:

'Housing: London - Question (26 Oct 2015)
http://www.theyworkforyou.com/lords/?id=2015-10-26a.970.2&s=landlords#g972.2
Baroness Williams of Trafford: I cannot answer the former part of that
question but, in terms of the latter part, the Government are certainly
keen to ensure that *landlords* know that their tenants have a right to
be in the houses that they are renting. Therefore, we are cracking down
on this and obliging *landlords* to ensure that the person tenanted in
their house has a right to be in this country.'

I propose, dear Ladies and Gentlemen, that whenever any persons here present use the term 'cracking down on' in relation to landlords, that they receive a very sharp electrical current to their buttocks, for being so bloody cliched and thick and talking about us as though we are bleeding criminals.

Reply to the comment left by "David Gill" at "27/10/2015 - 22:51":

I agree and because it was not in the manfesto I think that this is the grey area and not so cut and dry . Ie the lords might be able to do something even if its in the finance bill.

Reply to the comment left by "Ros ." at "27/10/2015 - 23:39":

Ros, do you remember when Margaret Thatcher had a go at teachers? The teaching profession is still recovering from the onslaught a quarter of a century later.

As to the position of the electrodes I would place them somewhere altogether more delicate.