Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Gary Mason" at "14/07/2015 - 23:29":

"I can categorically tell you that is not the case. I have in writing from Accountant that, your interest payment is added to your income"(meaning old style income ie profit as now, rent- all allowable expense INC fin int) then for new calcs add it back in.

yes but only if you deducted int from rent to start with, as in old model , your acc is describing the difference between old and new system and what you will need to do to existing figs to get to new system.figs(you just add it back so your profit is rent-exps only) In a seperate convo about new figs he will tell you not to deduct or add int , but just to deduct all other non fin exps from rent.. ..test me ..and ask him .

and you are required to pay tax even if you have no cash-flow.

Yep dont think anyone will argue with that ...HMRC will want tax paid no matter what!!!

Reply to the comment left by "Gary Mason" at "14/07/2015 - 23:29":

Gary, lots if people have said it - but you do not add your interest on your income. You just never take it off. It's a way of saying almost the same thing but there is a practical difference.

For example it is possible to pay tax when no 'real old style' profit is made. However there is never a scenario where you pay tax when absolutely no rent is collected in the first place. I mention this because I saw the debate earlier in they day.

Eg rent is nil, net income is nil, tax is nil. Forget the interest - earn nowt, pay nowt.

However if rental income and taxable profit exist (based in the new calculation.....and remember you must not deduct interest at arriving at your taxable profit) then tax is payable.
Depending on your tax rate - it maybe your relief may result in an overall cash flow defecit.

Unfair and a new method of tax relief rather than interest being a deductible cost ....but at no point did I add interest back into my income. What you do is keep the interst on in the first place and then when you have a tax figure to pay based on a daft much higher taxable profit - you then deduct 20% of your interest ie tax relief.

Hope that helps.

It seems to be the case that a main reason/excuse for this discriminatory attack on landlords as a special case who would have the major cost of our business - MONEY GOING OUT OF OUR BANK ACCOUNTS - re-defined as 'income,' is that the Government was intending to create a 'level playing field' with first time buyers. I think we have to clearly conceptualise how this is the wrong comparison. And how the only other groups we should be compared to are other businesses. If we can clearly argue BTL is a business and not a private purchase of property for our personal use, this would be a useful start in our legal argument against this measure.

I think one Minister to lobby is 'Nick Boles' who I've just realised is the 'Business Minister.' (he's on the telly as I write, talking about union laws changing). He's going on now about supporting businesses....

Reply to the comment left by "Ros ." at "15/07/2015 - 08:36":

Hi Ros

Have you written to your MP yet and if so would you mind sharing it please?
.

So after all this talk about a mass exodus from btl.....has anyone here yet instructed their agent to sell as a result of this budget change?

Everyone,

Can we stop this inward looking bickering over interpretations which has been going round in circles for pages and pages; I can only imagine the smiles on the faces of Generation Rent, Shelter and the Green Party who have been lobbying for this measure at the near total inward looking/in-fighting that has been going on on this forum. And just accept the fact that as a private landlord (as opposed to an incorporated Landlord) you will be paying a lot more tax. If you any more questions then speak to your accountant.

Now let's focus on what we are going to do about fighting the introduction of this change in the first place, and as a fallback position what can be done to mitigate this (e.g. getting applicable to only new purchases, CGT rolloever relief, etc).

Reply to the comment left by "Barry Fitzpatrick" at "15/07/2015 - 08:56":

I'm with you and Ros on this all the way Barry.

What do you suggest?
.

Reply to the comment left by "James Tallis" at "15/07/2015 - 08:53":

Good luck with your lobbying.....I am a paid up member of pcg (now called ipse). We've been lobbying government for the last 10 years about the unfairness of ir35 law which forces legitimate one man business's to pay tax as paye....In addition to company NI. (Double hit). Despite all the positive noises from tory government they have just simply turned the screw even tighter. I have been livid for the past 10 years. There are probably just as much if not more people affected by this than btl Landords

Reply to the comment left by "Simon Dewsberry" at "14/07/2015 - 23:57":

I'd like to add a few things to this conversation.

Firstly we are all working off limited information and the full facts hopefully will come out soon. We all have our own opinions, even accountants can have them and they can be different. Lets not be surprised at this stage if we get different ways of interpreting them.

So using Marks provided examples of 100K rental income, 75K interest, 25K costs.

I thought we were in agreement in that under the old system you wouldn't need to pay tax ( 100K - (75K + 25K) = £0 actual profit and hence £0 taxable profit) but under the new systems you would have to i.e. actual profit is still £0 but taxable profit is 100K - 25K = 75K and then you get relief at 20% of 75K i.e. 15K taken off your tax bill (the key point here is there is a tax bill to pay even though you have £0 in the bank).

Consider some more scenario's (I am ignoring the 3 clauses to say what you'll get the relief on, just to make it simple for now).

Scenario 4
There's been a fire and the house was empty for the whole year. Rental income is £0, interest 75K, other costs 25K. I believe your actual profit is now -£100K and your taxable profit is -25K, there is no tax to pay. Getting into the finer detail I guess here you have an actual loss for tax purposes that you use against profits in a latter year?

Scenario 5
Lets say the fire happened half way through the year and income is £50K, interest is 75K, other costs is 25K. Now your actual profit is -£50K but you do have a taxable profit of £25K which when tax'd you'd get relief on. So having had to put £25K into the "business" to keep it afloat the tax man cometh and wants some money too! I'm guessing here you don't have a loss you can use in latter years (you made a £25K "profit" after all) but you do have some unused tax relief that could be used.

After I bought up the possibility of loosing you personal income tax allowance if you have interest payments of more then £121200, Simon has listed a list of benefits that would also be effected.

I will fight like the rest of you but I think the government will have it's way but they may be twisted into introducing a new concept of "landlord taxable income" which is the figure our tax is worked out on (but any benefits entitlement or at what point we loose out personal allowance will be calculated on actual profit rather than taxable profit).

Jason