Summer Budget 2015 – Landlords Reactions

http://www.telegraph.co.uk/business/2016/11/08/this-is-the-chancellors-chance-for-a-bonfire-to-get-rid-of-over/

"When his successor, Philip Hammond, makes his first big set-piece speech later this month, one of the best moves he could make would be to repeal some of the worst. Such as? The buy-to-let tax should go, as should the complex changes to inheritance tax, the levy on sugar, and the increasing number of Isas.

Reply to the comment left by "Seething Landlord" at "08/11/2016 - 18:18":

Dr Beck’s statement is perfectly clear and logical. If you do not follow it then you must be choosing not to.

Your comment displays sophistry worthy of the Treasury. We do not receive “a reduction in the amount of tax payable” that is any different from any other enterprise in the country.

Deduction of finance costs from receipts is the normal procedure in calculating taxable profit. It is a cost to us, not a cost to the government.

The government does not pay us a penny, so our part of government spending is zero.

Furthermore, to say that a reduction in receipts is expenditure is to deprive words of their meaning. If my rent receipts go down by £1,000, it does not mean that I have spent £1,000.

HI Simon

I see where you are going if you own one property but if you own several then that's a different story.
I know a few landlords who are trying to off load there properties as quick as they can as these changes are likely to bankrupt them.
One has been over everything with his accountant and has know option but to sell.

There is another landlord I think on this blog put up her figures She turns over £500,000 a year rent by the time she deducts her mortgages repairs and other costs she was left with £210,000 which she has to pay tax on by 2020 she will have to find another £168,000 on top of the £210,000 total £378,000 to pay her tax bill so be fore she earns a pound her turnover needs to be around £700,000 a year before she earns a pound.
Her LTV is only 30 something percent.
Given those figures she like me will make profit on our rented properties which will be used to pay the tax due on our empty ones.
I genuinely hope you are correct.

Reply to the comment left by "Simon Hall" at "08/11/2016 - 18:51":

Hi Simon

I cannot confirm all of what you wrote because of three inaccuracies:

We will not be taxed on gross rental income because we will continue to deduct all the other costs incurred in this business.

The 20k will not be offset against future profits, it will carried forward and added onto the next year’s finance costs for calculating the relief.

Finally, I think you mean that the more rent you get the more tax you will pay.

But your answer regarding the original question from Paul Green, that he will not pay tax on the interest, is correct. And you are correct that if there is an increase in the finance costs, the amount of tax payable will not increase, it will decrease.

Reply to the comment left by "Appalled Landlord" at "08/11/2016 - 21:53":

How can "deduction of finance costs from receipts" be "a cost to us"?. It is a benefit that generates a cost to the Government.
" If my rent receipts go down by £1,000, it does not mean that I have spent £1,000". It depends on the reason for the reduction. If you had decided that you wished to reduce your receipts by that amount you could do it either by reducing rents or by giving your tenants a refund. The impact on your bottom line would be the same whichever way you did it.
"We do not receive “a reduction in the amount of tax payable” that is any different from any other enterprise in the country.". I have not claimed that we do and am certainly not suggesting that S24 is in any way justified or acceptable.
The point is that any benefit or allowance forms part of Government expenditure and the fact that it is given as a reduction in the amount of tax payable rather than as a payment is irrelevant as the outcome is the same - the amount available for Government to spend in other ways is reduced. That is not sophistry, it is recognising reality.

Reply to the comment left by "Appalled Landlord" at "08/11/2016 - 22:37":

"We will not be taxed on gross rental income because we will continue to deduct all the other costs incurred in this business."

Absolutely, I do not disagree but I was only shedding light on Mortgage Interest. We will indeed be able to deduct all other costs as we did previously with the exception of Mortgage Interest restrictions as already mentioned."

"The 20k will not be offset against future profits, it will carried forward and added onto the next year’s finance costs for calculating the relief."

End result will be same whichever way you look at it.

"Finally, I think you mean that the more rent you get the more tax you will pay".

That's exactly what I meant, I inadvertently stated Interest as opposed to "Tax"

Reply to the comment left by "Seething Landlord" at "09/11/2016 - 01:18":

Hi Seething Landlord.
I'm not sure what you mean. We don't get any allowances. Confusion has been fermented by Osborne using the misnomer 'tax relief' which has been used by HMRC for years to in fact describe the allowing of finance costs to be offset. It's a bit like me saying someone headbutted my foot. It's twisted and the wrong way around. So when a higher-rate taxpayer pays 40% this becomes twisted as though they have been granted a relief. It's called 'generous' on the part of HMRC that they pay more tax.

Professor Philip Booth has explained this previously and the arguments have been laid out on 118. As he says, the allowing of landlords' finance costs is not the same as the old MIRAS and to say it is is a basic undergraduate error that should not be made by the Treasury. Paul Johnson of the IFS, the Institute of Chartered Accountants of England and Wales etc.etc have all confirmed this. It is laid out in my report. If you haven't looked at this perhaps you could as it would clear this up for you. If you could then also forward it to your MP and others that would be good.

Thanks gideon where are u now

http://www.telegraph.co.uk/personal-banking/mortgages/lloydss-buy-to-let-division-pressures-landlords-to-increase-rent/

Reply to the comment left by "Seething Landlord" at "09/11/2016 - 01:18":

I am guilty of poor late-night editing. I changed “interest” to “finance costs” in one sentence without changing “It” (interest) to “They” in the next. I doubt if many people were misled as to my meaning, but I should have corrected it. For the sake of clarity I do so now:

Deduction of finance costs from receipts is the normal procedure in calculating taxable profit. Interest and other finance costs are a cost to us, not a cost to the government.

Deduction of finance costs from receipts is not a benefit, it is normal accounting practice in order to find the taxable profit.

This deduction is not a cost to the government. It would only be a cost to the government if businesses were taxed on receipts - rather than on profit - and finance costs were deducted from them first, as a concession. Even Osborne was opposed to taxing receipts, at least in the case of the massive foreign corporations.

If I reduced someone’s rent or even gave a refund of rent, that would still be a reduction of income. It would not be expenditure. Your accountant will confirm this for you.

I am trying to correct the misapprehension that the normal deduction of our major cost can somehow be misconstrued to be part of government spending. There are plenty of other people making false claims about our deduction of interest. If you are really a landlord who will be affected by S 24 why do you persist in fostering this misinformation?

Reply to the comment left by "Dr Rosalind Beck" at "09/11/2016 - 08:53":

Hi Ros. Perhaps instead of using the shorthand term "allowance" I should have said "any amount that we are allowed to set off against gross income to arrive at our taxable profit" is a cost to Government as it reduces the tax that they would otherwise receive. Maybe it's technically inaccurate to describe this as Government spending rather than a reduction in Government income, i.e. tax payable, but the effect is the same.

I have never suggested that S24 is in any way similar to the withdrawal of MIRAS but my recollection is that the "undergraduate error" was in relation to the double taxation effect of the new tax regime.