Summer Budget 2015 – Landlords Reactions

They are basically taxing you in invisible income with the motivation to stream line the sector into some sort of company structure and release some stock on to the open market for the queues of first time buyers waiting ha

They are also trying to give a competitive advantage to their corporate buddy's ( no doubt Tory donors ) to get into the market which in their eyes is lucrative

I cannot believe it is legal to tax in this way and to discriminate against one entity doing the same thing under another guise but mark has looked into it and they can

I keep saying the game has changed and you have to do what is best for yourselves as you are not going to get any favours from the establishment left or right they want more control and I think they haven't finished yet to be honest

Reply to the comment left by "Ray Davison" at "10/12/2015 - 13:47":

Ray

I think you are beginning to realise the importance of this massive sea change to the way taxation for landlords is going to be calculated. Now you need to understand how it affects you personally and what you can do about it.

I propose you do this in three stages:-

1) Download and complete the spreadsheet which can be found in the main body of the article at the top of each page of this discussion thread. This will establish whether you are facing a problem and if so the extent of it.

2) It you have a problem click the following link, read the article, complete the form and then discuss it with your accountant >>> http://www.property118.com/section-162-s162-refief-landlords/82564/

3) Also discuss this with your accountant >>> http://www.property118.com/avoid-refinancing-landlord-incorporation/82791/

Good luck
.

Reply to the comment left by "Ray Davison" at "10/12/2015 - 13:47":

As from 2020 finance costs will no longer be an allowable expense against income. Tax will be calculated on gross rental income less allowable expenses which will effectively mean that finance costs are included in the calculation as taxable income. This is why many will be pushed into the higher tax brackets. 20% of finance costs will then be deducted from the amount of tax otherwise payable.

For companies, finance costs will remain an allowable expense so they will get full tax relief at whatever is their current rate. Until the new rules come into force that is also the position for individuals, i.e. finance costs are deducted before tax is calculated.

If this is still unclear, use the spreadsheet to work out how it will affect you (link at top of page)

Reply to the comment left by "NW Landlord" at "10/12/2015 - 12:56":

Hi NWL

I agree that the way the government announced the change made it hard to understand. I’m afraid your description of how clause 24 will work is not right.

We will not be taxed on 80% of our finance costs at 40%. 100% them will be disallowed, increasing our deemed rental income. This will be added to all other income and the tax will be calculated using the personal allowance and working through the tax bands. HMRC will then allow 20% of the finance costs as a relief, and give this relief by deducting it from the amount of tax that they calculated.

If someone was paying 45% under the current rules his extra tax will be 25% of his finance costs.

If he or she was paying tax at 40% under the current rules, and will still pay 40% under the new rules, his extra tax will be 20% of his finance costs.

In addition, if the deemed income exceeds £100,000 he or she will lose part or all of the personal allowance.

If he or she was paying tax at 20% under the current rules, the extra tax will be anything from 0% to 25% of the finance costs, plus the possible loss of part or all of the personal allowance.

As you can see, the calculation is not straightforward. Fortunately, a spreadsheet devised by Alex Caravello can be downloaded from the top of the lead article above.

This spreadsheet is completely reliable, unlike many that I have seen on various websites. Its calculations are transparent. Whenever you change a figure in the red box on the work sheet called Calculator, other black figures will change. You can check they are right with a calculator. At no stage does it deduct 20% from the finance costs.

Because tax is calculated on total income, applying different rates to different bands, this spreadsheet is the only reliable way of calculating the extra tax that a landlord will have to pay as a result of Clause 24.

Thanks for that either way it's a stitch up of epic proportions but we are entrepreneurs ( although not treated by the government as such ) and will evolve out of this unfair situation

Reply to the comment left by "Appalled Landlord" at "10/12/2015 - 15:12":

Don't forget that all other benefits that are means tested will disappear as well.

If we wanted any more interference in our business with this non-stop onslaught, look at this, which has just appeared on Facebook:

'Anyone else heard anything else about the amendments made to the Housing & Planning Bill on Wednesday?

It’s a nightmare of a document to try & read through, but tucked away & labelled NC22 is this proposing all AST’s will have a mandatory minimum 3 yr period from 2018. I know this has been touted before, but I wasn’t aware it was actually being slipped in the bill. Its followed by a section introducing the need for landlords to carry out an electrical safety check too.

“Security of tenure
After section 19A of the Housing Act 1988 insert—
“Section 19B: minimum length of certain assured shorthold tenancy
(1)
Any assured shorthold tenancy (other than one where the landlord is a
private registered provider of social housing) granted on or after April 1,
2018 must be for a fixed term of at least thirty six months. It is an implied
term of such a tenancy that the tenant may terminate the tenancy by
giving two months’ written notice to the landlord.”
(2)
In section 21 Housing Act 1988 insert—
“(4ZA)
In the case of a dwelling-house in England no notice under
subsection (4) may be given for thirty six months after the
beginning of the tenancy.””
Member’s explanatory statement

This amendment would prevent private sector landlords from using the ‘notice only’ grounds for possession for the first three years of a tenancy, without affecting the rights of tenants to give notice and leave the tenancy early.'

Of course the large survey recently conducted by the DPS found that only 10% of tenants wanted tenancies of longer than one (or two - I can't remember offhand) year(s).

Reply to the comment left by "Ros ." at "10/12/2015 - 19:42":

Most tenants I've dealt with want to commit to 3-6 months and then look to extend in similar increments afterwards. None have asked for more than one year.

Also, both my insurance and mortgage terms stipulate a maximum of 12 months.

This change is unnecessary and ludicrous.

Reply to the comment left by "Gareth Wilson" at "10/12/2015 - 20:08":

It would mean the Government forcing us to breach our mortgage conditions. For UKAR that would be a gift from heaven. The whole thing is getting farcical. Where is the consultation with people in the know? The majority of landlords and tenants won't want this. They want us to commit to 3 years, but let the tenants only commit to two months - and most tenants won't want to give two months' notice - they often try and negotiate a couple of weeks instead of the month they have to give now.
I don't know what the RLA and NLA are doing about this, but I hope they are doing something. I know the RLA was very actively consulted over the Welsh Housing Bill, but it looks like they've probably been bypassed here. It's a 'stealth policy' just like their stealth taxes. Sly, in other words.

Reply to the comment left by "Ros ." at "10/12/2015 - 19:42":

It appears that NC22 was withdrawn, NC26 "not called", NC 29 & NC 34 withdrawn - see report of today's proceedings in parliament on the Bill. Breathe again but a warning of what Labour would like to see.