Summer Budget 2015 – Landlords Reactions

Mark your brother does not believe you !!!!!!! I should get a DNA done .

Reply to the comment left by “Mark Alexander” at “05/08/2015 – 20:55“:

I have stopped buying .I have 10% gearing on my portfolio of 38 flats and houses.20 of my properties are let to my local authority Brighton and Hove City Council who sublet them to families who have been made homeless 5 properties are let to foreign language students and 2 properties are let to benefit claimants .Perhaps L and G,HSBC AND RBS would like to offer their shiny new properties to my tenants.

PS RBS i and all my fellow taxpayers want our money back!

Reply to the comment left by “BTL INVESTOR SCOTLAND” at “05/08/2015 – 20:16“:

I still think to get the basic “new” concept over the Megan Shaw eg. is the best, with narrative:

This is direct from Megan Shaw Product Owner HMRC , contact details are on the bottom – so this can be confirmed very quickly should you feel it is incorrect.

From this very simple example we can see that :

1. A 20% tax rate payer is pushed into the 40% band with the new proposals
2. The taxable property profit is artificially inflated from 1200 to 12000
3. The “real profit” of £1200 was initially taxed @20% tax due £240
4. The increased tax payable is £1800 more (making a total of £2040)
5. The tax liability completely wipes out the profit and leaves a further liability of £1040
6. In percentage terms 2040/1200 is 170% and is the effective tax rate that will need to be paid
7. This simple model is no longer viable, the LL must sell up, pay down borrowings or increase rent.

Prop income 15300 is 1275 pcm (a 3, 4 or 5 bed HMO maybe depending on location) prop Val 275K with rent at 5.56% =15400
Expenses (3300) 10%.. 1530 agent fees and a few repairs, gas safe, insurance etc
Finance 10800 @5% equates to a loan of £216k and is at 78.5%LTV on prop Val £275k

These figures are very realistic and common place for individual Landlords, this example represents a large number of landlord positions.

If the Landlord on the example were to purchase a second identical property then the figures would be

Taxable income 4800
Less relief 2160
Tax due @40% 2640

Under the current system this landlord would have remained a std rate taxpayer even with 2 properties, under the proposed system he will very much be a HR taxpayer.
As LL will have profit of £1200 on second prop, his tax liability of 2640 represents 2640/1200 which is 220%

This is direct from HMRC , contact details are on the bottom – so this can be confirmed very quickly should be feel it is incorrect.

After April 2020 (when the restriction will be fully implemented) landlords that incur interest (and other associated finance costs) on residential properties that they let will need to calculate their tax differently. You will no longer be able to deduct interest from your rental income to arrive at your taxable profits, you will instead receive a reduction from your income tax liability equivalent to 20% of those interest costs. If that means you become a higher rate taxpayer (or you were anyway) then you will have to pay more tax as a result of this change. Please see the example below:

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 Fin 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 Allo(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

Please do get in touch if that doesn’t clarify the mechanism.
The Bill is subject to parliamentary scrutiny and so there are no guarantees as to what will become law before the Bill receives Royal Assent in Autumn.
Megan Shaw
Product Owner – Property Income & REITs
HMRC, Room 3/64, 100 Parliament Street, London, SW1A 2BQ
03000 585628

Idea for slogan for BTL:
A level playing field for all landlords!
Or something like that – what I mean is ‘a level playing field between non-incorporated and incorporated landlords, but I can’t think of a catchy way to put it! Monty’s example perfectly illustrates it.
Mark: regarding your brother only just getting it, I was looking at another property website yesterday – can’t remember what it was called – and a guy wrote on 30th of July something along the lines of: ‘Shit! I’ve just got it! All these weeks and I didn’t understand how bad it is!’ (I paraphrase)

@BTL investor Scotland.

The reason people will not sell & I am one of them.

a) Once you paid your mortgage off you will be left with very little money & what is one going to do with it.

b) They may not get a new mortgage.

c) If they have a large equity. They pay say 33% mortgage, 28 % capital gains tax, say 5% as Agents fee/solicitors fee They will be left with say 33%. This 33% will not be sufficient to get into a market,

d) Old mortgage will be on a good rate & once this is paid they will not get a fresh mortgage on the same rates.

e) Lot of landlord have bought the property for children’s school/university fee, marriage or their retirement. They may not be ready for these commitments.

Above are just the few examples.

Reply to the comment left by “Connie Cheuk” at “05/08/2015 – 20:19“:

Completely disagree with that CFonnie, most people i know dont want to live in tenamant blocks. I doubt they will be building these in rural areas, or leafy suburbs. No gardens, limited parking or extra for parking. A lot of these “apartments” around the country have failed miserably as “luxury apts” and have turned into squalid unwanted vacant pits. Many BTL investors have lost a lot of money on them , i see no reason why these investors wont do the same.

A lot of working Tenants want a nice place to live in a nice area, maybe close to family or friends, good transports links etc, most students prefer houses & flats to halls after first year …guess they will always be able to fill them with the homeless and asylum seekers who get no real choice in where they go. …helping the FTB by building rent only units ?? ….pass my beer .

Reply to the comment left by “Mark Alexander” at “05/08/2015 – 20:50“:

Tell me about it! I’m considered to be a paranoid delusional alarmist.

New slogan: You’ve got to be in it to believe it! 🙁

I tried to challenge views on the interest only, leveraged models and to bring debate on to help understand the governments thinking to then contra those concerns where we could. But that is not going to happen here.

The government will defend this as a tax on a finance model used by some landlords rather than a tax on landlords.

Couple of posters since HAVE seemed accepting of removal of interest only, no borrowing for deposits and even a levy for HRT but a change to how the calculation is done (to avoid tax on ‘loss’ or BRT becoming HRT). That will be the key to any debate.

Build to Rent is one of the many initiatives across the housing and lending agenda which will directly impact on Buy to Let. Again I won’t list.

Despite the continued rhetoric (scapegoats, unfair, discrimination) – fortunately the petition is generic enough to gain support.

Reply to the comment left by “Mark Alexander” at “05/08/2015 – 20:50“:

Mark, I have the same problem with my brother! How do we get past the bury your head in the sand attitudes of so many people?

8,200 signatures.