Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "NW Landlord" at "16/12/2015 - 12:50":

Hi Nw Landlord. There are grounds for pursuing a legal challenge, and I will share the information in due course, once I have received details from the law firm - hopefully by the end of the week.

Reply to the comment left by "Costas Tzanos" at "17/12/2015 - 17:47":

I believe a larger leveraged portfolio returns you much greater profits than a smaller unencumbered portfolio. I aim to make between 20% and 40% on each £1 I invest.. By leveraging you put in say 25% of your own money and 75% is put in by the lender ( your JV partner in effect) . If your pay rate is 5% on that loan but you are making 20% - 40% it makes sense to borrow so you can buy more properties

You take advantage of compound interest which when it really gets going shows excellent returns. If one property you buy in isolation is a successful positive cash flow business then you just replicate that business model to grow your business. This is like 101 other businesses. Which would you prefer 1 McDonald`s store or 200. Management headaches are there in any business and yes have to be managed accordingly. As you get bigger economies of scale kick in and that often saves time / money.

This means in my view 5 BTL properties are good 10 are better and 50 better still .
.

Just seen on BBC news that the number of families asking for help from councils is on the rise after being evicted... Hmm who could have predicted that, the governments response is they will make money available to help,

Bet they don't join the dots between the tax changes and these rises and long term the amount they think they will get will be lower than predicted as we all know LL's will incorporate or reduce their mortgages so its unlikely that the new taxes will actually bring any more tax revenue when you take into account the costs of the consequences of these new taxes.

If anyone would like to write to the BBC to complain about their biased article here, that would be good:

http://www.bbc.co.uk/news/magazine-35110421

The 'academic' they quote is a joke - making out LLs receive preferential treatment by the financial sector. How many times have we got to read this crap, masquerading as 'truth'?

Reply to the comment left by "NW Landlord" at "17/12/2015 - 19:40":

Yes, but it would be good if a few people could write to complain. I am currently busy circulating Professor Philip Booth's statement far and wide. He's a man who knows what he's talking about and has no axe to grind.

Reply to the comment left by "Ros ." at "17/12/2015 - 19:00":

Done, for what it's worth.

Complain to
https://ssl.bbc.co.uk/complaints/forms/?lang=en&reset=&uid=477217543

Location
England
First half of UK Postcode
Hr5
Type of complaint
BBC Online
What is your complaint about
Other BBC website
URL
http://www.bbc.co.uk/news/magazine-35110421
Complaint category
Bias
Contacted us before
No
Complaint title
Inaccurate and highly biased.
Complaint description
This does not give fair coverage to the issues. The facts are:- We have an established tax system, where taxable earnings from about £32-150k are at 40% For businesses, which the PRS is a vital part (about 21%) of the housing mix, there are destabilising imminent changes defying logic, convention or justice. There will be double taxation, and tax rates exceeding 100% of profit. (= LOSS) Rent increases and/or evictions to reposition portfolios away from HB / UC tenants has started, and is certain to be very significant by 2020. The resultant LHA costs will be eye watering. The SLDT will distort the market away from caring local, often 'incidental' landlords, in favour of larger more commercial, that is mercenary, outfits, Thus BTL (which has been a gravy train for some in the past, according to the press), will be non viable for many in the future. If it is not to be loss making, rents will rise substantially. BTL is a long term substantial illiquid investment, that directly affects the life quality schooling, travelling and social adhesion of communities, if interrupted by such policies. No point in complaining without a better plan. The aim should be to tax all net income, that is all profit and gains, less all legitimate expenditure. It is so simple, tax all rents, and gains in property at the marginal rate as profit, and allow legitimate costs such as financing, repairs, improvements even extensions. This overcomes the perverse situation that any improvements come out of the taxed pocket of the landlord, so improves the housing stock. Yet if this work directly leads to gains in property value, it is correctly taxed as income (amortised over the period, and RPI indexed to be equitable). I will be happy to elaborate on any aspect if you wish.

I know this is not in direct reply to the article, but as they get 250,000 complaints it won't matter

Reply to the comment left by "steve p" at "17/12/2015 - 18:29":

Yes Steve, I wonder why?

Why do these loudest, serial whingers Shelter, BBC article et al expect other people to use their savings, or take on mortgage debt, to further subsidise their welfare handouts, to be insulted for providing them with a decent place to live in but not expect to pay what it actually costs in an open free market? Are they the same ones that trash it in spite when they leave? (But there are rogues and saints on both sides)

As I write, "Can't Pay take it away" is saying 25% of HB recipients say they have been refused accommodation as they are on benefits, 67% of landlords refuse to take HB tenants. (Two of three of my HB are behind with rent, the third is still paid direct to me so isn't.) Then Osborne makes matters far far worse by his triple whammy, forcing rents up further.

later on I.m sure OO will get taxed on housing

Let's start with the sector that's really cushioned by the government – that's owner-occupiers, especially those who have paid off their mortgages. Of course, significant benefits to mortgage payers were wiped out when tax relief was cut by Margaret Thatcher's government and eventually ended 12 years ago. But all owners still enjoy capital gains tax relief, currently worth almost £6bn.

Those with no or only small mortgages also benefit from not being taxed on the value of their home (as used to happen through the old schedule A tax). This tax relief is now valued at over £11bn. Pooling these benefits and adding back in the stamp duty and inheritance tax of approximately £5bn that owners do pay, the net subsidy received is still a surprising £12bn per year.

Of course it's true that no government is likely to restore schedule A tax, but even disregarding it the outcome is that owners pay no net tax at all (council tax doesn't count as tenants pay it too). As Professor Steve Wilcox points out, the existence of these tax advantages means that house prices are far higher than they might otherwise be, benefitting existing owners at the expense of those struggling to enter the market.

Owners in difficulty also receive support with mortgage payments. All governments have provided subsidy to shared ownership, as a first step on the ladder, and about 170,000 homes have been built on this basis alone. The biggest subsidy of all (for the individual households who have benefitted) has been the right-to-buy, offering 2m buyers a typical discount of £26,000. The UK Housing Review gives the total value of these subsidies as £1.6bn for the year 2009/10 – and in the recent past they have been even higher.

Private landlords don't enjoy the same tax advantages as owner-occupiers. However, the recent growth in the market for landlords who own only one or two properties is fuelled by homeowners who can afford the deposit to buy another house simply to rent out. Landlords also find it much easier to get interest-only mortgages.

http://www.theguardian.com/housing-network/2012/jan/27/government-subsidised-social-housing-rent

8. Renting raises problems for “asset-based welfare” policies
The growth of private renting has the potential to create bigger problems for society if high
housing costs mean that today’s younger generation has to either delay or radically reduce their
accumulation of financial assets. This will particularly create problems for welfare delivery,
because much of government welfare policy over recent decades has sought to transfer
responsibility from the state to the individual.48 Individuals have been encouraged to build up
more assets partly so they will have a bigger financial buffer to fall back on in difficult times,
meaning the welfare state will be required to do less (this was part of the reason for the
encouragement of home ownership in the first place). The Coalition Government’s reforms to
adult social care are just the latest example of this trend, as they are largely based on the
assumption that many pensioners needing old age social care will be able to fund it through
their housing wealth.

if a large proportion of today’s younger generation can
never afford to become homeowners, coupled with the dramatic decline in pension-saving
witnessed over recent years, then it raises substantial problems for asset-based models of
welfare delivery.

Looks like GO used this report

Recommendations
This report has explained the problems with the favourable tax status of BTL and outlined the
negative consequences the present situation has for the rest of society. This section will put
forward some policy recommendations which have been designed to try and improve the
situation.
Summary
 Reduce the ability of landlords to deduct their mortgage interest against tax, because this
allowance is regressive and distortive
 Abolish the wear and tear allowance and only allow landlords to claim for individual items
on a renewals basis
 Greatly reduce the period of exemption covered by the 36-month rule on capital gains tax,
ideally to as little as six months
 Curtail lettings relief
 Deduct capital gains tax at source during property transactions, as happens in other
European countries (notably France)
 Build more housing to reduce housing costs for young people

Resolving the housing crisis is a problem which has flummoxed governments of both main
parties, but one relatively straightforward intervention the politicians could make would be to
significantly alter the taxation of property ownership so that BTL investment no longer receives
special treatment. Given the benefits which accrue to society from higher levels of owneroccupation
(not to mention that owner-occupation remains the desired tenure type for most
non-owner-occupiers), it is even worth considering whether the government ought to
investigate methods of explicitly favouring owner-occupation compared to other forms of
housing tenure, although pursuing this aim without doing anything to increase the supply of
housing could run the risk of causing additional distortions. Given Britain’s present economic
situation, and the evidence which suggests that today’s landlords are predominately a wealthier
group than the rest of society, it is also worth asking whether we should be forgoing large sums
of public revenue in order to provide them with tax relief. If the government really is serious
about helping more would-be first time buyers get onto the property ladder, reforming the ways
that property ownership is taxed is a critical place to start.

http://www.if.org.uk/wp-content/uploads/2013/11/Why-BTL-Equals-Big-Tax-Rip-off.pdf