Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Simon Roads" at "20/07/2015 - 19:39":

Yes, Simon, you're a star!

Reply to the comment left by "Simon Roads" at "20/07/2015 - 19:36":

I guess thats my point, big debts here.......I too never intended to repay a relatively big debt........and I have had some soul searching as too why that is.

Different game now for me regardless of the government changes.

Reply to the comment left by "Simon Roads" at "20/07/2015 - 17:06":

Hi Simon

The effective rate of tax would be 155.6%.
But where do these figures come from? If they are invented than the impact of the calculation may be diluted. In this example the business is barely sustainable under the current rules.

Interest as a percentage of rent seems very high at 58%. If the mortgage rate went up from, say, 3.5% to 4% the profit would be wiped out.

The profit is equal to one month’s rent. If voids increased, profit could be wiped out that way.

I agree with Phil, examples must be realistic, like Mark Shine's and Ros's.

Reply to the comment left by "Appalled Landlord" at "20/07/2015 - 20:12":

example suplied as illustration, no idea if "Live" business - but certainly helps get the message across clearly, it will hopefully motivate people to check their own figs and put them forward, also will start to wake Ll & accts up to the likely nightmare we face

Reply to the comment left by "Mark Alexander" at "20/07/2015 - 15:34":

Hi Mark

If you posted: “If you thought WB was a problem, have a look at what the government has got in store for you in 2017. If the sum of your total income and your BTL finance costs exceeds £43,000 you will pay more tax .“and then link it to this site, then everyone who is on the WB list would get an email and open it. I would do it myself but I can't find the open forum. It is not my place to post it on the secure forum.

Reply to the comment left by "Mark Shine" at "18/07/2015 - 12:18":

All

Reason for this message is partly a test to see how long this takes to appear online. My own message (click on it above to see what that was) that I am replying to took about 24hrs to appear, by which time it was several pages back, so it was perhaps not seen by active forummers here.

Having chatted to Mark (Alexander) on phone tonight, I understand the reason for the delay in my previous posts appearing (= new user / late night / weekend).

I have still not written to my MP & the chancellor yet. Before Ros rightly reprimands me for my delay :-), the reason for that is I want to ensure that my initial communication with them focusses on what I think they may listen to. And then build on that. A lot of the political classes are on hols at the mo, but I will write to their offices soon.

Reply to the comment left by "Appalled Landlord" at "20/07/2015 - 20:12":

there is far worse than 58% out there , 2 bed flat -
Low wage earner with just one flat, now works part time due to looking after kids

val 120k
mort 94k
Int @ 6% =5640pa
rent 650pcm =7800
exps 1k
other income 10k
Rental income £7800 £7800
Expenses £1k £1k
Mortgage interest £5640 £0
Net rental profit £1160 £6800
(+9k income).........£11160 £16800
Personal allowances £11k £11k
Taxable income £160 £5800
Basic rate tax £32 £1160
40% tax £0 £0
45% tax £0 £0
Less new 20% tax relief N/A £1128
Net tax liability £32 £32
Tax increase £0 £0
Effective tax rate on “real profit” 2.75% 2.75%

This illustrates a few things :
int: rent 72.3%
also shows the "new" system hasnt changed this (REAL scenario) tax position
Someone please check my figs are right above , thks

Reply to the comment left by "Simon Roads" at "20/07/2015 - 19:07":

Hi Simon

For 2020/21 you assume the nil rate is lost because the income exceeds £121,200. But these are joint figures and tax must be calculated individually for Ros and for her business partner.

They each have an income of £50,000 under the current rules and will be deemed to have £90,000 under the new rules. The interest is £40,000 each. So they are in the 40% band now, and would still be in that band under the new rules.

I have manually calculated the tax using the rounded off allowances just as Megan Shaw did.

In both years they would have the personal allowance (nil rate band) of £11,000 and the tax calculated in the 20% band would be £6,400. In the 40% band the tax would be £2,800 this year but £18,800 in 2020/21, from which “relief” of £8,000 would be deducted.

Tax payable this year is £9,200 but in 2020/21 would be £17,200, an increase of £8,000.

This is a simple case where the marginal rate of tax in both years is 40%. So the tax on the amount of rental income that was paid to the lender (or interest) would be 40% of £40,000, or £16,000, and the “relief” at 20% would be £8,000, making a net increase of £8,000 each.

The effective rate on real income goes up from 18.4% to 34.4%.

Reply to the comment left by "Ros ." at "20/07/2015 - 13:49":

Hi Ros

I don’t believe that only 1 in 5 landlords will be affected. If the sum of your total income and your BTL finance costs exceeds £43,000 you will pay tax at the higher rate and so suffer from this measure.

But the fraction does not matter. It would be iniquitous if it only applied to 1 landlord.

Yes, it would be iniquitous however many people it applied to because it is, to quote the IFS again, 'just plain wrong.'
And thanks for the further analysis of my finances - the extra sum I will be liable for is going down and down - try and get it to zero for me! (i.e. what it always bloody has been! And should be!)
I am slightly encouraged by the idea that the political classes are on holiday as I have heard zilch from all my communications. Just sent off my 3rd letter (toned down a bit) to the Chancellor and business ministers, regarding the political repercussions this will have for the Conservative party. Got to try every tack.
Now, I'm trying to work on an argument regarding how landlords aren't responsible for what happens to first time buyers. Any points of view people have regarding this would be much appreciated.