Shadow Chancellor John McDonnell anti Buy to Let but said very little

Reply to the comment left by "Ed Atkinson" at "03/10/2015 - 16:52":

Yes Ed, if the objective of government is to provide affordable homes they should say so clearly and not conflate that with ill considered revenue raising measures; if they want to increase tax then do so but distinctly, market rigging measures such as Help to Buy are extremely difficult to measure for the effectiveness and cost efficiency. My own son had been considering a flat puchase just before the scheme was introduced and was told quite clearly that the next building release would be 20% more expensive, in other words the government subsidy had passed directly to the builders, surprise, surprise; you only have to look at the building company accounts to see where the largesse ended up, in the ever deeper pockets of the extremely wealthy. I think we need to curtail demand by a rigorous restriction on immigration and by longer term measures such as rebuilding social/family cohesion, we quite simply have too many single person households and "post" nuclear families with all the associated problems that brings. Call me old fashioned but 2+2 had a lot going for it. The answer is therefore most definitely not to build over this green and pleasant land but to manage the precious asset that we have. The nibling away of green belt and even more so the destruction of SSSIs etc must stop now and as for building on farmland we must be truly insane, I was too young to know much but rationing ended during my lifetime and we are far more dependant on imported food than then. Much of the above puts pressure on land availability but we have to look to sustainability in the round and not just on a single aspect. Therefore, the building of ever more insanely expensive developments for foreigners must be curtailed and possibly with permission linked to a greater proponderance of builds at sensible prices (a form of price control and stock for occupiers only, no investors) and with HAs being allowed to invest and grow their stock for long term rental with no right to buy. Not a whole answer, just a few thoughts for a Saturday afternoon.

In response to my fellow posters ,
I spoke with a letting agent in Cleckheaton in Yorkshire on Friday concerning "Clause 24" and it soon becomes apparent that you must talk to the masses is very simple terms.

1. She had heard something about it, but hadn't a clue what it meant.
2. She thought it would have very little impact based on the bullshit that George Osborne and his cronies have already spewed out.

3.5 minutes later, she was extremly concerned about it, when I informed her that most of her landlords would be getting tax demands that they wouldn't be able to pay, they would be going bust left right and centre and they would be selling up their portfolios on masse if it isn't stopped.

I explained that it was ALL finance costs, from mortgages to bank charges that are affected.

I also showed her how even the smallest BTL landlord would have all their tax free allowances burnt up by just paying their banks interest back.

That being the case, I must repeat that you must keep it simple when trying to explain this debacle.

I assume, perhaps falsely, (Equals People), that discrimination against any section of society is an evil to be stamped out and defeated?

Do you believe that or don't you?

if you are blue or brown eyed, how much tax should you pay?
If you are gay or straight, how many properties can you own?
If you are Christian or Muslim how much rent should be taxed?

Now if you believe that we should all be treated the same, congratulations you are not a hypocrite or fascist dictator.

If you do believe that, then I have a question for you...l

At what point in your political delusions did you decide that it's was alright to discriminate?

I have no objection to having tax rates changed etc, but I don't agree to discrimination against me for not being incorporated or being smeared as a Jew, brown eyed bastard landlord by Corbyn and the press.

The party that your sympathies appear to lie with are a bunch of hypocrites and unconvicted crooks.

Two jags Prescott is now a Lord Prescott, "right on brother"
Hazel, "I can't write a cheque fast enough" ,Blears
Snorting cocaine off a prostitutes breasts "Lord "Not Enough Evidence", Sewel.
Jack " I was framed" Straw for charging for his time and access on video.

This is why I became a landlord.

I have lived in shit private housing and shit council housing as a kid.

My mother bought her shit concrete "shepards space saver",asbestos riddlled architectural shit hole of a council home so that she could improve on the crappy maintenance she was not even getting in the early 1980's from Corbyns left wing council buddies.

She struggled to pay for everything, but she did it anyway?

Why?

Because she strived for something better for her kids, she wanted to make something of her existence and she didn't want to be a burden on anybody.

I don't want to live in a fucking council house you pig ignorant fuck wit!
I dont want to pay tax rates in excess of 100% either for offering a service that is bloody hard work, unsociable and at times very stressful.

That is why I vote Tory, it's called self reliance.

We are not living in a socialist state, I do care about the NHS and labour and Corbyn do not have a monopoly on feeling sorry for the poor.

The difference between us is that you give the impression that, as a landlord,I don't think about anybody except myself.

Sometimes that may be true, but it usually is when I have to deal with tenants that have suddenly rewritten a tenancy agreement in their heads.

But when I comes to discrimination because of a smear campaign from your left wing sympathising hypocrites that have second homes in Tuscany, I tend to get a little pissed off and get vocal about it.

Anybody that has money after tax deserves it.
Those that don't have money after tax need to earn it, learn how to earn it or change the method of obtaining it.

Taxing me in excess of 100% of what I earned is not what I want to do for the rest of my life.

That is why the landlords who have got a grip of what 'Clause 24' will do to all landlords, within 4 years are trying to stop this measure now.

We have nothing against tenants, never had, never will, we just want equal treatment under taxation rules.

If you want an end to private housing, buy my portfolio for £3m and you can show me how the World should function according to Corbyn.

The new rules on tax relief on loan interest when fully implemented will put some of my rental income in the 40% bracket, whereas now I am just under 40% threshold.
One of my properties has recently become vacant, and subject to contract I have now sold it. In future, I will then just avoid the 40% band. Renting is hassle enough without paying 40% tax on the income.
We will be investing some of the sales proceeds in shares. A couple can invest £30,480 between them in share ISA's. The dividends are only taxed at 10% and no tax forms to fill in. Who knows, I still might retain a stake in the housing market and buy several house-builders shares.

ed,
I am 'perplexed' in what you have written about not being bothered to even sign the petition regarding 'Clause 24', but were concerned about the West Brom interest rate hikes etc.

Would I be correct in thinking that you have not got a copy of Excel and have not realised what is coming down the line at all landlords that have finance bills to pay?

If you have got a copy and have used the spreadsheet, how on Earth can you have come to the conclusion that this has something to do with levelling the field, being fair because it's being introduced slowly etc?

This measure is not just aimed at BTL mortgages, it is ALL finance charges!

The change will be far worse than anything that the West Brom could throw at you.
They would only repossess your property, 'Clause 24' will bankrupt the most SUCESSFUL landlords if they have used finance.

For every mortgage payment and finance transcation charge of £1 you will be dragged towards a higher tax bracket by £1, once you break through it all bets are off.

In addition your tax free allowances that even tramps in the street get as a statutory right, will be spent up, as you pay interest to your bank.

Do you want to be taxed at a rate of over 100%, that would make Alan Sugar emigrate?

The whole point of us landlords whining about 'Clause 24' is how the HMRC intend to calculate your taxable income.
It isn't the rate of tax that's the problem, it's the method of calculating your taxable income.

What was a Business Expense for everybody else in the UK running a business, is now to be classed as 'Taxable Income'

So if you paid £100,000 to your bank each year in interest and earned no profit, you will now be taxed on £80,000 despite never gaining benefit from that money or making any profit as a Higher Rate Tax Payer!

That spells bankruptcy for anyone who can't stump up to £32,000 in additional tax you will be forced to pay for simply paying off your finance interest for that tax year.

But if you are not an individual landlord or you run any other business you won't have to pay any tax under 'Clause 24'

That is why our heads have gone purple and we want to strangle next doors cat!
It's denying the laws of physics accounting practice.
It's discriminatory tax rates of over 100%
It steals your personal allowances
Even if you make a business loss and your property lies empty, if you use finance, you will always have tax to pay that you dont actually have.

It is a ludicrous measurement of taxable income that's the problem.
It was dreamt up by some smackhead idiot that has bad breath, no girlfriend and an incredibly small penis.

That person has then gone on to tell the chancellor that it will only affect 1 in 5 landlords.
The chancellor has then believed them.

It will affect all landlords at some point as it drags them towards a higher tax bracket at which point their tax rate doubles for no increase in real income and possibly no profit.

How much profit does a typicle BTL property make in the 1st year?
Diddly squat?
But you are happy to pay tax on a loss are you?

You will have paid bank interest on that money borrowed, if you are a standard rate tax payer, every £1 paid reduces your tax free allowance benefit you need to exist as your calculated taxable income increases by £1.
So you are already being taxed at 100% before you make any profits as your allowance gets burned away.

As your taxable income increases by the same £1, when you hit the higher rate tax band and beyond you will then have to pay tax on the difference.

But not if you are a company, housing association or council.
Just a BTL individual landlord.

Well I for one think that all landlords have a duty to speak to their accountant and see what lies in front of them from April 2017.

Ed you must be in a wonderful position of having no finance charges or you know next weeks Euromillions winning numbers, because you should be under no illusions of what 'Clause 24' will do to you and your tenants as they currently pay all your bills.

I for one will have to increase my rents by an average of £187 per month per tenant to just stand still.

Stuff the West Brom hike, it's not even a ripple in my pond compared to this travesty.

Please get signing Ed, then join our battle against discrimination and eye watering tax rates over 100%

Reply to the comment left by "Gary Dully" at "05/10/2015 - 10:39":

Thanks Gary, I have not looked at the spreadsheet, but you have prompted me to play with some numbers. Firstly surely HMRC only taxes income. So if there is no rent there is no income!

If we take the worst case of someone whose non-property income puts them in 40% tax, then they are worse off by 20% (40%-20%) of their interest payments. If they are on a tracker with a current rate of 3%, that is equivalent to a 0.6% rise in the BoE rate.

This is outrageous - how can I sign this e-petition? Anyone have an email address for Osborne? I think we should all email him too. I run a business. In any other business if you borrow money to expand, your interest payments are fully tax deductible, regardless of whether or not they are secured against property or called mortgages. For anyone to suggest that BTL landlords are somehow given a concession or special relief at the moment is just risible and a blatant misrepresentation of the facts . We don't get anything that anyone else in business doesn't get. What is in fact being proposed is to single us out from other businesses for special discriminatory treatment. Though I believe that if you trade as a limited company you won't get this special treatment!!
We are not the same as private housebuyers, in the same way that anyone who runs a vehicle for work is not the same as a private car owner, and is treated for tax differently.
Are we to also now to be brought more in line with private housebuyers with regards to CGT and IHT?

Reply to the comment left by "David Bruce" at "05/10/2015 - 16:03":

https://petition.parliament.uk/petitions/104880

Reply to the comment left by "Ed Atkinson" at "05/10/2015 - 12:48":

Ed,
forget about the 20% calculation for a minute, it is a red herring for the general publics consumption.

Today you get 100% relief, just like every other business, don't you?

Well that relief is to disappear completely as your finance charges are converted from an 'allowable expense' to 'taxable' income, regardless of any profit made.

That's a 100% tax on your finance expenses, before you go to the next stage of the madness.
(You don't need rent to add to your problems at this stage of the calculation).

Today, you will achieve a nett profit say of £20,600 and be taxed on it at 20% after your tax allowances are deducted.

Take away your allowances of £10,600 before you pay tax.
Leaving a tax bill of 20% of £10,000 = £4000
You pay £4000 to HMRC and they leave you alone for another 12 months.

Now let's add 'Clause 24' to the mix.
Before 'Clause 24',you could ignore your finance charges as they were an allowable business expense.

Not anymore!

Say you have finance charges of £200,000 (the one in 5 landlords?)

That now is marked as 'Taxable Income' by 2020 you will be taxed on that £200,000 plus your profit of £20,600

So your 'Taxable Income' is now £ 220,600 and HMRC will let you offset 20% of the finance charges element by 20%, (£40,000).

You will now have a 'Taxable' income of £180,600 now let's subtract your allowance of £10,600 from that.

You now will be taxed on £170,000 at the prevailing tax rate.

So a bloke or lady earning £20,600 in 'Real' money now pays the same tax as a person earning £170,000 and at their tax rate.

(Are you bankrupt yet?)

That is 'Clause 24'!!!

You are actually losing 100% of a current allowable expense in exchange for a maximum 20% allowance against an income calculation that is artificially inflated by the HMRC and their crazy method of calculating your income.

So you are now being assessed on your banks income or profit, not anything you actually have ever been able to personally use.

In addition this will apply to your bank charges, overdraft interest, standing order fees, roof repair loan interest, boiler loan interest etc

The actual disbelief and outrage needs to be channelled to your MP.

How many tenants will be evicted, when you can't pay your tax bill?

That is what is about to happen to All individual Landlords regardless of what tax band they are currently on.

Because of HMRC' crazy income calculation under 'Clause 24' you will be taxed as if you have earned and spent your finance charges on a Lamborghini and a tank of unleaded petrol for private use.

Goodbye BTL finance for everyone except Limited Companies?

Reply to the comment left by "Gary Dully" at "06/10/2015 - 10:17":

Sorry folks my Mathis isn't brilliant, good job I charge rents weekly or I'd be ruined.

Here is my example again:
Year 2015.
If you earned £20,600 in net profit
Take away personal allowance of £10,600

Leaves you with a taxable bag of money of £10,000
Tax man gets a payment of £2000 (20%) and leaves you alone for 12 months.

Now add 'Clause 24' to the mix
From 2017 to 2020 it is phased in.

You have paid say £200,000 in finance charges each year.

Finance charges become 'Taxable Income'

Now add your profit of £20,600

You now have a 'Taxable Income' of £220,600

Deduct your personal allowance of £10,600
Deduct 20% allowance of your finance charges = £40,000
Allowable deduction of (£50,600)

You now have a taxable income of £220,600 - £50,600 = £170,000
Taxable at various bands.
(Also remember that high earners lose their personal allowances, but I won't include that here).

So that means that lady or gentleman landlord is earning £20,600, but pays the same tax as somebody earning £170,000.

But the landlord that is trading as a limited company will still be taxed normally and so will every other uk business.

My apologies for my earlier error.

My point of all of this is that 'Clause 24' will affect ALL landlords and it doesn't take many financed properties to drag you into a higher tax band.

If the chancellor can justify taxing private individual landlords on the 'clause 24' basis, why should limited companies not be treated in the same way? Why does the nature of the owner of the property change the taxable liability on the income? If something is taxable, or an expense allowable, or not, the legal standing of the asset owner shouldn't make a difference, surely. It makes no difference to the tenant. He is just picking on what he assumes are 'the little people' who won't fight back, whereas big property companies have some clout.