Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Neil Patterson” at “08/07/2015 – 19:27“:

Good point! Wrong numbers. There are currently 45.6 million eligible voters in the UK. Only 29.7 million voted in the last election according to a recent article in the Telegraph.

FYI I’ve had this reply from my MP, Andrew Murrison:

Thank you. As you say, you have to be doing quite well to be paying tax at 40% unless you have other sources of income. You could of course if you are regarding buy to let as a business have it treated so for tax purposes and pay the appropriate rate of corporation tax which has been cut in the budget. Most landlords also reckon on an increase in their equity, although I accept that may be rash going forward.
I don’t think non residential businesses would expect to get tax relief on income at 40%.
I do understand your point but even the revised figures given as profit represents a fair return on capital and I’m confident buy to let will remain attractive for many people.
The changes are being implemented over years so that existing landlords have time to adjust their business model if they wish.
Best wishes,
Andrew

Reply to the comment left by “Barry Fitzpatrick” at “10/07/2015 – 10:23“:

Clearly he doesn’t understand that as consequence of landlords having no CGT rollover allowances is that it is rarely financially viable to move residential assets into a corporate structure.
.

There seems an unfairness inherent in this change by the Chancellor.

Naturally, I don’t suppose the big pension funds who want a piece of the private rented sector action will be affected by this, so roll on the Tesco-isation of buy to let.
The dear pension funds, big overseas investors and the other big boys must be cheered, as their small “pesky and nasty” landlord competitors just got clobbered whilst they are thrown the keys to the hen house.

As the small private landlords have grown the sector, including lots of new build, (at least they did until around 2002 when daft lenders panicked on all their poor lending they had done on what was clearly a level oversupplied new builds flats plus some fraud), this does not seem fair.

In the Rugg Review from 2008 – a very thorough review for the government of the day, they looked at the past performance of the big players in private rent and it was not exactly complimentary about them, finding their product and service was worse than that of small scale private landlords.

And yet the government has swallowed the lie that the big pensions funds will so great for the private rented sector.

After some reflection, I think it is possible that this change from Osborne may not do all that much anyway. But wealthier higher rate tax landlords may scale back on new purchases and spend more of their cash on bringing forward allowable expenditures to improve the properties they already have to get to a lower rate of tax, if they can.

Plus, for some, a company limited structure will be worth considering -the tax experts will know more than me – and I see a few have commented here already.

If people can, as Mark has said, the simple thing is to shift the ownership over to a spouse who may enjoy a lower rate of tax.

However, a line has been crossed here, and landlords are now easy targets for the government, even a Tory one, wanting to raise some cash.

Expect more of this kind of thing going forward. (And I’m sure my prediction of the elimination of the little understood Private Letting Relief will come to pass).

But if it puts off a lot of new would-be landlords from entering the world of buying to let, then that means less competition for the likes of me. (Trying to see a silver lining here, folks!)

As a last point, the bringing back of the renewals allowance and the ditching of the wear and tear allowance seems very odd. If there was anything that was a bit of an open target for those inclined to play fast and loose with their tax affairs, the renewals allowance was surely it. At least the wear and tear allowance as a straight 10% deduction off net rents could not be dodged – and seemed a fair rate to levy. Most odd! Strange hokey kokey that one.

David Lawrenson
LettingFocus

Reply to the comment left by “Mark Alexander” at “10/07/2015 – 10:28“:

I also don’t think he understands that non residential businesses can offset the cost of finance against their profits.

I seem to have his ear at the moment, as I am getting email responses back within minutes of sending them.
@CLaire/@Mark – I have made both of these points to him. But clearly he like many MPs do not understand this.

Our only hope is to get shear weight of numbers with as many people as possible lobbying their MPs.

Reply to the comment left by “Barry Fitzpatrick” at “10/07/2015 – 11:34“:

I agree, but in the meantime why not suggest meeting him to talk him though it.
.

It is vey straight forward :
20% tax payers will pay the same as they have done
40% tax payers will pay 20% of their mortgage interest (& any other finance cost) on top of what they used to pay
45% tax payers will pay 25% of their mortgage interest (& any other finance cost) on top of what they used to pay

So if your mortagage pinterest payments are 10K then you will have 2000k added to your tax bill, if a 40% tax payer and £2500 added to your tax bill.

Just think of it exactly as it is – a 20% or 25% penalty (of whatevr amt you pay out in finance interest) for being successful.

Add to that the effect of the withdrawl of the 10% wear and tear allowance on rent collected figure and be sure that you tax bill is going to be sgnificantly higher than it ihas ever been.

Reply to the comment left by “Barry Fitzpatrick” at “10/07/2015 – 11:34“:

An amnesty on CGT for BTL landlords or even CGT rollover allowance for landlords between now and the full impact of the tax hike would be two less contentious solutions for him to consider putting to the Treasury 😉
.

sorry that should be:
So if your mortagage pinterest payments are 10K then you will have 2000k added to your tax bill, if a 45% tax payer and £2500 added to your tax bill.