Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Appalled Landlord" at "20/12/2015 - 12:53":

PS

This suggested increase of £32,078 in rent assumes that your deductible costs do not go up, otherwise it will not be enough. What you need to increase by £32,078 is your profit before finance costs.

However, if mortgage interest goes up you would have to increase rents even more, in order to maintain an after-tax income of £10,000. You would receive a higher amount of interest relief. You can see the effect by putting a higher interest amount in the spreadsheet.

Reply to the comment left by "Appalled Landlord" at "20/12/2015 - 12:53":

Thanks Appalled Landlord. At last I seem to have my figures right!

As I put on my original illustration, I do sometimes have income from other 'deals' but I wanted to keep this illustration very simple to make an unbelievable big point!!

"But I have never seen a case where a landlord is moved from the nil rate band to the 40% band."

Well it works the same when you make a LOSS!! Please tell me that is not extortion.

"In 2020/21 the effective rate of tax on your real profit of £10,000 will be 187.23%. After working on your business for the year, you will hand over all of the profit to the state, plus a penalty of 87.23%."

Exactly, they will have to make allowances somewhere.

"You have circled a take home income as minus £8,723. That of course is an impossibility. This amount is in fact the penalty, which you would have to finance from some other source in order to prevent HMRC from bankrupting you"

I have a Rental business with high mortgage costs and high other costs. WHY THE HELL SHOULD I HAVE TO FINANCE FROM ANOTHER SOURCE TO PREVENT HMRC BANKRUPTING ME. WHY???

"To maintain the same after tax income of £10,000 you would need to increase your rents by £32,078, or 17.8%, between now and April 2020. The odd £78 would be taxed at 45% because your deemed income would exceed £150,000 by that amount"

WHY SHOULD I - ITS A LUDICROUS SCENARIO!
ITS NOT ACCEPTABLE AND THE SOONER WE ALL GET TOGETHER AND FIGHT THIS PROPERLY THE BETTER! 🙂

http://southwalespropertysolutions.com/LandlordTax

Reply to the comment left by "Ros ." at "20/12/2015 - 13:12":

Hi Ros

From his latest reply I don't think Rhys is getting these credits. If he was, he would lose them, having been magically converted into a high earner.

Reply to the comment left by "Ros ." at "20/12/2015 - 13:12":

Thanks Ros, not quite in that situation yet! I do a few deals here and there but my portfolio (which is what this is about) shows c£10,000 because of other outgoings. I want to keep this example very simple to illustrate a point

Reply to the comment left by "Rhys Jones" at "20/12/2015 - 13:37":

If you have "other income" as a sole trader then all of you figures will change ..as it will all get lumped together for the tax calc ...and you may find you are paying 45% on some of it ....

Reply to the comment left by "Rhys Jones" at "20/12/2015 - 13:37":

@Rhys,

If you want a real shock re-run your figures but with a £5k increase inyour total mortgage costs. Your rate of tax increaes from 186% to 352% (although the actual amount of tax payable would drop to £17,603 from £18,603 but it'll be on a profit of only £5k).

Note: there's an error in your spreadsheet still which incorrectly copies the interest payments in cell J18

Reply to the comment left by "Rhys Jones" at "20/12/2015 - 13:29":

I wonder, Rhys, if you have any adult children who are low-earners or any other trusted relative? I am thinking along these lines - where houses have not gained much in value and therefore there is little or no CGT to pay, to 'sell' or 'give' these houses to the the trusted relatives, so that they would be basic rate taxpayers and the mortgage interest payments on those houses would then be removed from your tax liability. As they, at the moment, would still get the 20% 'relief' this could be a good move. If these then are in the hands of these relatives for 7 years, there would be no IHT to pay, I understand. If I do this, HMRC will miss out on a large amount of money from yours truly. And I never would have thought of it, if C24 hadn't come along...

So you will be will be writing to your MP, Davild Gauke MP david@davidgauke.com, hmrc, and shelter, to see what they suggest will happen? Explaining why you can't sell, and the effect on rents. This is an ideal example to show the C24 problem. Interesting to see if they say you should be incorporated etc. This might then be evidence for your Select Committee submission.

Is this calculation taking account of the rent increases taking you into the highest tax band, I'm behind the curve on the details......? You are in effect having to pass the effect of your 45% tax rate to the tenants, who can't afford it either, just to break even.

Will the market in your area stand the increases or will it lead to voids and greater loss? I suspect there has been little increase in value in your area over past 10 years, unlike the south east.

Reply to the comment left by "Trendo " at "20/12/2015 - 14:21":

Thanks Trendo, I used to be an IFA and appreciate I have to add other bits in. Im using this example to illustare a point. If I add in some pension, some 'deals' maybe the figures all go up but there is still a massive increase because so much of my PERCEIVED income (rents) is taxed at 40%. Ive run my exact comparison and its actually worse with MORE being in 40%! Is my example not socking enough and the principle that I should not have to create any other income or sell any houses to pay this rediculous tax as its wrong. I wish people would fight this instead of explaing to me what i need to do. NOTHING is a good place to start because its just WRONG and has to be changed in some way!!!!

Thanks Barry, I thought this was bad enough without increasing rates!!! J18 was on my original sheet I think. The opne up there now is the Property118 sheet

Thanks Ros, I am aware of that, and do have a couple of grown up daughters. At the moment I plan on doing nothing apart from fight this farce! 🙂

Chris I have written to my MP who has written to the finance secretary. Ive also written to Megan Shaw HMRC who provided a very PR response. I replied a little stronger , now waiting. No reply from Martin Lewis or the Telegraph yet. Ive never been that interested in politics, this is bringing out my angry side!

Reply to the comment left by "Saeef Khan" at "20/12/2015 - 12:45":

An interesting point in the guardian's link to Ireland

"There will also be a tax-relief measure introduced in the Finance Act to allow landlords who lease to tenants in receipt of social housing supports such as rent supplement or the Housing Assistance Payment, to avail of 100% mortgage interest relief on their borrowings where they commit to accommodating tenants in receipt of the above payments for a minimum period of three years."
10/11/15