Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Y L Newbury " at "08/07/2015 - 15:23":

[FX: adopts smug expression 🙂 ]

Not for me, as I have always done my property accounts that way anyway.

It's a hangover from normal business expense accounting in a limited company - a habit engrained in me for over thirty years.

That and a sneaking suspicion I harbour that the reason the taxman set the rate at 10% is because he reckons he is onto a good one in doing so.

I've got a feeling even the Government doesn't know what it has proposed... It's still not making sense to me. As others have said, we can all offset 100% of the interest against our gross income. My worry is that somehow it is going to mean we can't offset the interest payments at all. Because people have been going on over the last few weeks or months about 'a level playing field' between residential and BTL mortgage holders - despite the fact that BTL is a business and we landlords also can't offset our residential interest payments on our actual homes. According to that logic, we also wouldn't be able to offset the money we spend on insurance, maintenance, everything really. We would be taxed on the gross rental income. According to this, our business wouldn't be a business; it would just be a personal hobby, where we spend money on other people's homes as an act of altruism.
Does anyone here have a contact in Government that they can ask to explain this? It seems like it could be a cock-up. Hopefully it will get cleared up in the next few days.
I have come across the idea before that you are taxed even on no income. Eg, in Spain, if you have a holiday home which you never rent out, they still demand that you pay tax on an imputed income. They also charge you a 'wealth tax' on all your world-wide income if you are resident in Spain, regardless of your income and whether you can afford to pay it.
I expect it of a country like Spain, but I really don't want to see that kind of crap coming in here.
(and yes, Dan, I got my maths wrong. Well spotted. I was just testing you.)

Reply to the comment left by "Simon Dewsberry" at "08/07/2015 - 19:47":

Fantastic idea Simon. I have played with your words slightly and sent him the following email ....

Subject: Unfair tax on landlords

Dear Mr Osbourne

Today you took the fundamental basics of business “Business profit = Income – Running costs” and you destroyed it, along with any trust or credibility that you had.

BTL mortgage interest costs are a straight forward cost of running a business, as is rent, rates etc.

You are now planning to collect tax on money spent, not a tax on profit.

This is past ridiculous.

This needs undoing and quickly – have you lost your mind?
.

Yes like in the US they tax waiting and bar staff on their tips at a set rate. Since I doubt if anyone in the UK declares them maybe there's something in that. The people who won't lose out though are those with little or no borrowing/expenses so the wealthiest landlords with premium property.

Reply to the comment left by "Mark Alexander" at "08/07/2015 - 19:56":

Here's a screen shot of the automated reply I received, if you click the image you can see it full size

Reply to the comment left by "Romain Garcin" at "08/07/2015 - 19:12":

how so?

So we now have special rules if your business is providing quality homes for the good citizens of the uk. It is not a "normal" business where you offset expenses against income to arrive at profit to be fairly taxed, nope ..now if you are good at this business and offer more or better housing, then the government will now penalise you ..very heavily in fact .. as a 40% tax payer you will get a penalty of 20% of you annual mortgage interest payment, as a 45% tax payer you will get a 25% penalty. This figure will probably be slightly higher with the removal of the 10% wear & tear allowance for furnished props. I'm sure over the next few weeks thre will be lots of creative ideas on how to attempt to re arrange affairs to minimise this ridiculous and unfair attack on hard working providers of much needed accomodation in the uk. i look forward to seeing this creativity !

I'm still reeling from the possible implications of this change:
1. When interest rates rise it will have a greater impact on BTL which pays higher rates than the domestic buyer.
2. Having treating BTL as an exception, politically it will be easier for a future chancellor to justify phasing out BTL tax relief entirely - which would have an even greater impact on the return.

At a macro-economic level:
BTL is suddenly a lot less attractive, and it may have been phased to avoid a sudden sell-off that might reduce house prices too quickly - affecting both the market for builders, and putting recent buyers in negative equity.
I thought housebuilding was been a key strand of the Chancellor's 'plan' to grow the economy, but if some new developments rely on getting BTL investors to buy off-plan, this would also affect builders.

Can anyone in simple terms explain how before the budget you could offset 40-45% (dependable on which tax band) of the mortgage interest against rental income and now only 20%?

It doesn't make any sense to me.

Pre budget you could offset 100% interest against rental income regardless so what/how has this changed today?

I think the terminology of 'tax relief' at 40-45% is getting mixed up with paying that amount in tax?

Reply to the comment left by "Mark Alexander" at "08/07/2015 - 20:01":

If you are contacting George in his capacity as Chancellor of the Exchequer, please resend your email to public.enquiries@hmtreasury.gsi.gov.uk.