Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Lisa S" at "16/03/2016 - 18:33":

Hi Lisa.
Can you post this on the Judicial Review page (which you can see to the right on this page)? I'm sure Chris and Steve would like to see this.

Reply to the comment left by "Ros ." at "16/03/2016 - 18:40":

Done!

I received following information my accountant today:

On mortgage interest relief, there is an intriguing documents entitled “clarification to finance costs restriction for landlords” which is intriguing in so much as it is very hard to interpret. It *looks* like some back peddling from the original quite bonkers legislation, but it is hard to tell how much or how far. The key line for me is as follows:

“ It ensures that the basic rate tax reduction applies and is calculated as intended.”

This could mean more or less anything. But is this a climb down? I daren’t hope too much, but it does smell a bit like one. This didn’t make the speech, and could be nothing more than a basic tidying up of some horrible legislation, but it could a major redraft such that only genuine higher rate tax payers have a restriction, and basic rate tax payers are not affected.

It seems unlikely, so don’t get your hopes up just yet.

I understand that means they are going ahead with the reduction to the basic rate of tax in other words it's happening sorry

my accountant came up with some new advice in relation to the mortgage interest tax relief. If you have no earned income, only investment income then he suggests it is possible that even the 20% tax credit may not be available! Horrific.

His wording is:

'The best understanding of the situation from 2020 is that mortgage interest relief has effectively been abolished. Instead a tax credit of 20% is claimed at the lowest of mortgage interest, profit from the property business or total income exceeding allowances. We await HMRC’s exact definition of ‘income’ hence we would always err on the side of caution i.e. that for a professional landlord with investment income only, that tax credit could be zero. Obviously we will ensure that this is not the case for our clients.'

Reply to the comment left by "Simon Hall" at "16/03/2016 - 20:24":

Hi Simon

The “clarification” is available from:
https://www.gov.uk/government/publications/clarification-to-finance-costs-restriction-for-landlords/clarification-to-finance-costs-restriction-for-landlords

I don’t see it a climb down, more as a tightening up.

It looks to me as if they have found something wrong in the drafting of the tax reduction (what most people have been describing as the 20% tax relief). This was described in the Policy Paper dated 8 July 2015:

“Individuals will be able to claim a basic rate tax reduction from their Income Tax liability on the portion of finance costs not deducted in calculating the profit. In practice this tax reduction will be calculated as 20% of the lower of the:

• finance costs not deducted from income in the tax year (25% for 2017 to 2018, 50% for 2018 to 2019, 75% for 2019 to 2020 and 100% thereafter)
• profits of the property business in the tax year
• total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year

Any excess finance costs may be carried forward to following years if the tax reduction has been limited to 20% of the profits of the property business in the tax year.”

https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

The first and last of the 4 points of today’s clarification are clear.

The 2nd point of the clarification is:

“ensure that the total income restriction to the tax reduction applies where the relevant finance costs or property profits are higher than the total income”

This was already stipulated above. It does not clarify anything to me.

The 3rd point of the clarification is:

“ensure that total income is a measure of the net taxable income after other reliefs”

I do not know what other reliefs they are referring to, unless they consider offsetting losses brought forward to be a relief. I do not know what the words “a measure of” add to the sentence.

To describe this baffling document as a clarification stretches the meaning of the word beyond breaking point.

BBC News at 10.... Just reported that the small business 'tax give away' would be balanced by larger businesses, such as construction, not being able to offset some debt costs. Did anyone else hear that?

Reply to the comment left by "Lisa S" at "16/03/2016 - 22:33":

Hi Lisa.
I was only half-listening to that bit in the Budget - I think it was about the multinationals not being able to offset all their interest costs in one country -i.e. the UK - so that they could avoid paying any tax at all - something like that, I think. But maybe someone else was listening more closely. I was never interested in all this stuff until they decided to screw us over!

Reply to the comment left by "Ros ." at "16/03/2016 - 22:36":

Hi Ros,
I haven't heard any roars of protest, so it obviously isn't meant to be 'levelling the playing field' between our non-businesses and all other UK businesses.

I'm a bit behind with comments this week so apologies if what I am about to say has already been discussed.

Did you know that a Government side document clarifying C24 has been produced?

Discussion on Facebook suggests that the effects previously believed to be the case are not as bad as first thought.

Has the Government watered down the potency of C24?

I'd be interested to read other people's thoughts.

Please see >>> https://www.gov.uk/government/publications/clarification-to-finance-costs-restriction-for-landlords/clarification-to-finance-costs-restriction-for-landlords

We are emigrating to Malta this weekend so my life is upside down and in boxes right now but I look forward to catching up on this discussion again sometime next week when we are a bit more settled.
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