Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "jayso 43" at "06/12/2015 - 16:59":

You are spot on jayso 43 exactly my thoughts.

Reply to the comment left by "jayso 43" at "06/12/2015 - 16:59":

jayso 43,

‘Buy to Let isn’t dead, just Buy to Let with borrowed money.’

Well not quite… as ‘incorporated / LTD borrow to let’ for the small and medium landlord businesses will surely increase at an exponential rate over the next few years as more and more non incorporated LLs became more aware of the C24 impact?

I agree with your other points that *if* supply/demand remains constant then rent rises may not be dramatic as some may think due to C24, purely because a large proportion of LLs simply will not be affected by C24. However those LLs who will be affected and who are renting at considerably below ‘market level’ may be forced to try to increase rents, which may exert some upward pressure (above inflation) on ‘market levels’?

I think two of the main reasons that rents have not escalated anywhere near the level that sales values have (in some areas anyway) is (1) that many LLs need to avoid costly void periods and also (2) as bad tenants can easily cost a LL thousands of pounds, naturally they are willing to be more flexible on renewal if they have a good tenant.

The sales market however is completely different and I’ve seen some of worst examples of human behaviour and greed when it comes to a fair proportion of sellers (of their home). Apologies if that offends anyone.

Reply to the comment left by "jayso 43" at "06/12/2015 - 16:59":

I agree BTL is not dead but I also believe that BTL with borrowed money isn't dead either. I`m highly leverage and my tax bill will rise about 4 fold when the full effect of the new tax measures kick in. But if there is 5% growth pa ( as widely predicted over the next 4 years) then the value of my portfolio will rise per year about 8 times that of my new tax bill in 2020.

As long as I maintain a good contingency fund and good cash flow which i have done and will do I believe you can stay well ahead of the new tax structure. The beauty of being highly leveraged is of course any capital growth is magnified and if you believe property prices will double in say 15 -20 years as I do then the returns are still very favorable for a highly leverage landlord
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My latest blog looks in detail at the biggest hurdle that highly leveraged landlords need to clear in order to avoid the restrictions on finance cost relief.

Link below
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Reply to the comment left by "Jonathan Clarke" at "06/12/2015 - 19:20":

Hi Jonathan,

Having read your profile, I find that, you advise others on property matters. I assume your properties are held on indvidual basis as you are talking about, your income stream being affected with the effect of Clause 24.

Are you likely to incoporate your rental portfolio to escape Clause 24?

My next project will be to explain the rise of the QNUPS. This abbreviation stands for qualifying non UK pension scheme.

I believe they could be the best structure for new BTL purchases going forwards.

In summary, no CGT or IHT. 30% loan back provisions. 25% tax free cash at age 55+. gross rent taxed at a flat rate of 20%, funding up to 60% LTV.

As you can see from the above list, there are pros and cons. My analysis will look at both in detail.
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Reply to the comment left by "Mark Alexander" at "06/12/2015 - 19:24":

Mark, I am very interested in this method of mitigating clause 24 and will speak to my accountant next week about it. Please can you explain in more detail what you mean by this?:

There is a catch, three actually. The first is that even with the benefit of s162 relief, CGT is payable on any amount by which mortgages exceed base costs across the portfolio, aka ‘latent gains’.

Reply to the comment left by "Manchester Landlord" at "06/12/2015 - 19:40":

Your accountant is the best person to answer that question but here's my layman a example.

Say you purchased your entire property portfolio 20 years ago. Let's say the purchase prices were £1 million. Let's say that you've spent another £200,000 on the properties since then in terms of capitalised improvements. On this basis your base costs would be £1.2 million.

If you've not borrowed more than £1.2 million then you don't have any latent gains to worry about.

However, if you've borrowed say £2.2 million you would have a £1 million latest gain to pay capital gains tax on.
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Reply to the comment left by "Mark Alexander" at "06/12/2015 - 19:24":

Mark,

That's interesting...does not this fall under GAAR?

Reply to the comment left by "Mark Alexander" at "06/12/2015 - 19:51":

Understood - thanks Mark. look forward to hearing more about QNUPS.