Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Simon Roads" at "20/07/2015 - 09:35":

Hi Simon

You're not stupid, you're dead right.

And if he had a second property he would pay 175% of the profit - from both - to the government.

Reply to the comment left by "Ros ." at "20/07/2015 - 10:13":

The existing properties vs existing debt finance point is critical i agree.

Reply to the comment left by "Ros ." at "20/07/2015 - 10:13":

Hi Ros

I consider it normal that tax changes should only be applied to future transactions. However, the fact that this is being phased in over 4 years indicates that it is intended to affect all mortgages. If it was only going to apply to properties purchased in 2017 there would be no need to phase it in.

Reply to the comment left by "Ros ." at "20/07/2015 - 10:13":

Hi Ros

I consider it normal that tax changes should only be applied to future transactions. However, the fact that this is being phased in over 4 years indicates that it is intended to affect all mortgages. If it was only going to apply to properties purchased in 2017 there would be no need to phase it in.

Please be careful what you say in your letters. There have been a number of comments which are incorrect and which can be used by MPs to make your letters/e-mails seem just wrong.

"...a tax bill for interest he has paid on his mortgage"
"... finance ... treated as income"

These are a couple of the more recent ones. I have not picked them to have a go at the authors, whose work I applaud. However as these comments are incorrect it would be possible to say that as you do not understand this concept then you do not understand anything about the proposals.

The proposals do not seek to tax the interest. They are being set up to restrict the amount of tax relief being given on interest paid by landlords.

This is a completely different concept.

You may believe that it is the same thing and in practical terms it may be. However if you do not express it in these terms it seems that you are not grasping the legislation and the MPs would be able to pass your comments by, as you "have the wrong end of the stick"

As a consequence of restricting the interest relief the amount of income on which tax is payable by a landlord will increase substantially. This may effect a whole range of items which are based on the amount of taxable income you have.

These include, but are not limited to: child benefit, basic rate and higher rate tax bands, restriction of personal allowances, levels of income used to assess university grants, pension credit, CSA assessments.

There are some other benefits which are assessed on the level of income but these tend to be for those people who have little income and once a certain level of income or capital is reached the benefits stop being payable. These types of benefit are generally not those associated with landlords!

I think that the more people who write to their MPs the better but please make sure your letters have the correct wording.

Reply to the comment left by "Simon Lever" at "20/07/2015 - 11:01":

Simon,

Do you think it would be worthwhile setting up a thread for draft mp letters so authors could seek help or comment before sending?

Reply to the comment left by "Ewan Murray" at "20/07/2015 - 11:12":

yes please I am waiting for it... I have a Labour MP ... so not sure if we need to draft different letters for parties...

I suspect most landlords are burying their heads in the sand or are blissfully unaware of the consequences of the budget.

I wonder whether the major accountancy network and training organisations could be persuaded to produce comparison software to enable their members to prepare tax projections for their private landlord clients over the next 5 years.

This could put the cat amongst the pigeons.

It would be a good service for all accountants to offer too because it would demonstrate to their clients that they are forward thinking. They may even pick up additional tax planning work.

I know we have several accountants following this thread so what do you think of this idea and how might you be able to help?

Accountants are likely to get a far better response from networks they are members of that I would do as a result of a cold approach.

Any takers?
.

Reply to the comment left by "Appalled Landlord" at "20/07/2015 - 10:19":

Before Restriction (16-17) £ After restriction (20-21) £
Salary 40,000 Salary 40,000
Property income 15,300 Property income 15,300
Less Other costs (3,300) Less Other costs (3,300)
Less Finance costs (10,800) Less Finance costs (0)
Property profits 1,200 Property profits 12,000
Taxable income 41,200 Taxable Income 52,000
Less Personal Allowance (11,000) Less Personal Allowance (11,000)
Tax due on 30,200 Tax due on 41,000
Tax at 40% 3,600
Tax @ 20% 6,040 Tax @ 20% 6,400
Total Tax 6,040 Total Tax 10,000
Less Finance Costs @ 20% (2,160)
Final Tax 6,040 Final Tax 7,840

Having looked a little closer at the extrapulation of Megan Shaw HMRC the figs for an identical 2nd property in the portfolio would be :

12000 taxable profit
giving tax due 40% = 4800
less relief £20% of 10800 = 2160

Tax due 2640

which in real terms is 220% of rental profit to be found to service tax liablity

Reply to the comment left by "Mark Alexander" at "20/07/2015 - 11:44":

Dear Mark,
I think that would be a fantastic idea about an accountant that could produce projections over the next five years based on a landlords current income and expenditure. I have spoken to a number of large portfolio landlords and they were blissfully unaware of how it would affect them until they had examples of their current figures projected.