Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Mark Alexander" at "14/07/2015 - 17:06":

HI Mark

that is exactly what the chancellors is saying the interest you pay will be counted as income.

I understand what you are saying here no income in and £10,000 out. Maybe if you have one property this is clear how ridiculous this is.

I know you have quite a large portfolio so you will show say £100.000 including the £10 from the burnt down house you will have to declare interest paid.

so you will pay tax on a property that cost you and made zero from and now have a liability of what ever tax group your in of the £8,000 after taking the 20% away from the £10,000

Reply to the comment left by "Neil Robb" at "14/07/2015 - 19:18":

Thanks Neil, you seem to be on track

Reply to the comment left by "Neil Robb" at "14/07/2015 - 19:18":

No Rob, that is not what the Chancellor nor the HMRC have said.

The official sources have been linked to many times in this thread
.

Reply to the comment left by "Simon Lever" at "14/07/2015 - 17:17":

Hi Simon

The way I am understanding this is by 2017 onwards and increasing to 20/21 the tax many will count all interest payment as profit even though it is paid out.

So let just say after allowable cost you make £5,000

but paid the bank £20,000

the tax man will say you made £25,000 that year less 20% relief leaving you to pay tax on £20,000 at what ever rate you have to pay.

And again even if you are a 20% tax payer or 40% the amount of tax due will be higher than it is now.

I really hope I have this wrong.

Reply to the comment left by "Mark Alexander" at "14/07/2015 - 18:51":

Mark,

Unfortunately, you have not given the full answer, I asked the amount I would pay to HMRC to the nearest pound however you left your computation incomplete.

Please try to understand that, interest is added on to your income and then you pay tax minus tax relief.

You are completely wrong otherwise the way you are calculating nobody will pay any further tax under new rules.

Your profits increase as a result of the interest costs, as a deduction pre tax calculation, being removed.

Your income doesn't increase by means of adding the interest amount to your profits.

Right?

Think the terms that people are using or have in their head on this is causing confusion, as has been pointed out numerous times now.

Reply to the comment left by "Neil Robb" at "14/07/2015 - 19:18":

the interest you pay willonly be counted as income on the basis that "before" the interest was taken away from the rent. "after" it wont be taken away and only be the comparison of before and after can the statement "you add the interest in and get taxed n it" hold true. The reality of the "after" is that it is not added or taken away the profit is rent - expenses(excl int payments/finance). THEN once tax due has been calculated a relief which is equal to 20% of finance costs maybe deducted from the the tax due figure.

rental income remains constant, taxable income will increase, tax due will increase and net income will decrease (for most Landlords)

All this confusion is over terms used and by mathematically using different ways to get to the same answer.

Reply to the comment left by "Gary Mason" at "14/07/2015 - 19:29":

Gary, if you wish to convert the old system to the new then yes add the int back in.BUT the new syatem as a stand alone system: int is not taken away from the rental income nor added back in. rent - exps(excl int/fin) =taxable income

add other employed income etc

then work ut tax due
then rdeduct relief fig from tax due (20% of int/fin)

The increase in tax due will be effectively 20% of the interest as the relief has been halved. Your system takes the result of the old sytem and converts it to the new syatem ...which is at cros purposes to what everone else is doing inc hmrc !

Reply to the comment left by "Simon Dewsberry" at "14/07/2015 - 19:35":

Simon,

"All this confusion is over terms used and by mathematically using different ways to get to the same answer."

You have finally hit the nail on head in one sentence.

Bottom Line, if your income exceeds by £1 over and above £43000 it could be interest payment, rental income...your tax will increase it by £0.20 pence whether you like it or not that's the case,

You don't have to make a penny in profits but paid out £100k in interest payment to banks you will be expected to pay £20k after tax relief. If you can't get that, then I'm afraid either people are living under false pretences or have not got a clue.