Summer Budget 2015 – Landlords Reactions

Hi Jason

We agree that on Syed’s example, where he has no other income, the tax payable for 2020/21 would be 3,400.

You have awarded him some other income of 11,000, and calculated the resulting tax to be 5,600. I agree.

So he would pay 2,200 on this 11,000.

Your conclusion might give someone the impression that he is paying 40% on his other income of 11,000. I would look at it another way. I would say that his personal allowance, the nil rate band, is fully used up by this other income, which means none of it is available for his rental profits. This means that 11,000 of the latter is shunted through to the 40% band, making the tax 4,400 more.

And because of this other income, the amount on which relief is calculated is not reduced by the personal allowance, so there is 2,200 more relief.

The net result of the 11,000 other income is tax of 2,200 on top of the 3,400 he would otherwise pay.

Reply to the comment left by "syed shah" at "16/07/2015 - 13:47":

Hi Syed
Sorry I did not reply sooner but I have been out for the afternoon. In the meantime, you will have seen Jason’s explanation.

Reply to the comment left by "Ian Simpson" at "16/07/2015 - 14:23":

Hi Ian

I hope your meeting goes well. I have put a few points together also:

HMRC states that the objective is to make the tax system fairer. In fact it is iniquitous.

The result will be a levy on money paid out to a third party, not a tax on an income.

The government has decided to attack people who borrowed to buy properties in their own names to rent out, but not people who bought them through companies. I do not see how that will make the tax system fairer, or level the playing field with owner occupiers.

The way it has been presented is propaganda. They say that some of us get 40% relief on mortgage interest which is unfair to owner occupiers who lost their mortgage interest tax relief years ago. This is a false comparison. The latter was given to all owner-occupiers who had a mortgage. It was intended to encourage people to buy their own homes. It was given regardless of what the owners did for a living.

It is an artificial way at looking at the costs of a business. We don’t say a newsagent is getting 40% relief on the interest on his shop’s mortgage. The interest incurred on loans taken out to buy assets that are employed in a business is fully tax deductible from income in every other type of enterprise. Why should the provision of accommodation be treated differently? Why does the Chancellor want to deter the provision - and construction - of rental accommodation, already in short supply, which facilitates the mobility of labour both within the country and from outside it, to the benefit of the economy as a whole?

Even if a landlord does not earn enough now to exceed the 20% tax band ceiling. that does not mean that he will not be affected by the change. The interest itself, when added back to income, will turn some people into higher rate payers, as HMRC’’s own example shows.

HMRC state that it is expected that 1 in 5 individual landlords will receive less relief as a result of this measure. This is hard to believe. Has this figure been checked by the Office of National Statistics? If not, it should be.

This proposal has unsettled landlords and so could cause another house price fall as they sell properties en masse, just as the economy is starting to recover and people are starting to climb out of negative equity.

The NLA described it as a sop to the Labour Party and the Green Party. Why should the Chancellor give them a sop after these parties were comprehensively rejected by the electorate?

It is an attack on his party’s natural supporters. It will lose his party goodwill, support and votes, and possibly even members.

HMRC will demand payment of tax on an illusory profit even when the landlord has no real income,either from renting properties or anything else.

HMRC’s explanatory document states that “The measure is not expected to impact on family formation, stability or breakdown.” Except that once a landlord has used up all his financial resources to pay the annual levies, HMRC will bankrupt him - if his lender has not already done so. His home is at risk if he cannot keep up with the government’s lurch to the Left.

Those who don’t commit suicide will become a burden on the state.

Regarding the point that buy to let is a business and not passive investment income, it is important to stress the fact that with buy to let there is a service provider (landlord) and client (tenant)

One can accept a level of speculative investment with regard to ownership of the asset, but the business element is the main driver which is deriving an income for providing a service.

The costs of this service provision include the mortgage interest.

Reply to the comment left by "Barry Fitzpatrick" at "14/07/2015 - 21:26":

Mark, I'm not sure if this is possible but would it be an idea if someone (maybe you???) set up a control list so we can make sure each of the 330 conservative mps writes to George Osbourne about this? Do you have P118 members in each of the Conservative constituencies?

My letter focused on some real examples of first time buyer type properties that I have bought in our area. I gave him real addresses, prices, dates and time on market, offer price and purchase price. It was quite clear from this that these properties were well within the reach of first time buyers and that there was plenty of opportunity and time for FTBs to buy them. For whatever reason FTBs freely chose not to buy them after several months of marketing. I eventually purchased at well below asking price which could be argued dragged the market price down. Interestingly they were let within a couple of weeks of marketing them to let.

Basically I bought something no-one else wanted to buy. I don't see any problem.

Reply to the comment left by "Roanch 21" at "16/07/2015 - 19:09":

I don't have the resources for that, sorry.
.

I just went on the Government website and looked up how to start an e-petition, to be greeted with the message that the facility isn't available until the end of July...
That gives us enough time to think about the wording, see if we can get the RLA or NLA to start it and so on..
I've just sent my letters to George Osborne, Nick Boles, Sajid Javid, Anna Soubry and Brandon Lewis. You just go on this webiste:
https://www.gov.uk/government/ministers And then cut and paste the various email addresses. I sent each email separately for maximum impact.
My next job over the next day or two is to to try and get a newspaper to cover this story from our position - as someone mentioned on this or the other thread, the Mail or Express might like to do it from the angle of 'housing crash predicted!' etc.

I prefer the title "Housing Crisis On Couse For Greater Shortages"
.

Sorry Mark. I prefer mine!

Reply to the comment left by "Roanch 21" at "16/07/2015 - 19:09":

I don't think it's because FTBS don't want the properties. ...People are desperate to get on the property ladder. It's probably because they can't afford the repayment mortgages. This is one area where btl Landords have the advantage.....Being able to use interest only mortgages.