Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Michelle O’Connor” at “11/07/2015 – 10:33“:

Often the gearing issue is %age borrowed at rate X against value. The issue now raised by Osbourne is %age monthly payment against monthly rental income. Can’t change the former but if free market rules prevail – rents are going up, before some of us crash and burn.

unaffected Landlords wont need to put their rent up ……free market rules will prevail !

I agree with Simon

(“There will be tax planning opportunities which will present themselves as the situation becomes clear. Until we have the whole story, in the words of the book, DON’T PANIC”)

I don’t mind paying my fair share of tax, I think HMRC has been pretty generous so far. I recently switched a mortgage from interest only to capital repayment and interest. Capital repayment is not tax deductible, but I will pay less interest in the long run, and own my asset. That’s more important to me than avoiding tax.

That’s just one simple example, but for those that feel this means they end up paying more PAYE tax than they personally feel is fair, then they can look at how they structure their income – is the property portion really PAYE, or is it a business?

I have a business, and claim interest as a cost, because that is a limited company and unrelated to my PAYE. My company pays 20% corporation tax on profit.

Things change. Tax rates, legislation, they change. We can change with them, or not, the choice is ours.

If we embarked upon a legitimate strategy to minimise tax, then we need to make sure that strategy keeps up with the times. Things have changed. Check your strategy, change it if necessary. Trim the sails to stay on course.

The schedule and way this is introduced, 25% at a time, seems gentle enough.

As Simon says – DON’T PANIC

Reply to the comment left by “Simon Dewsberry” at “11/07/2015 – 17:20“:

Hi Simon, I would venture this – there will be individual landlords with one or two properties. Let’s assume they are basic rate tax payers and thus unaffected and thus don’t raise rents. What percentage are they of the whole of market of landlords? IIwould safely guess a very small %age. So when this small quantity of these landlords properties are taken up, what’s left will be the ( Quasi ?) professional landlord , who would be ( relatively) highly geared basis easy lending by the banks and interest being chargeable at the higher rate. Couple that with withdrawal of the 10% allowance – this will push more landlords into the higher tax bracket. Always expect the worst and hope for the best.

….and a lot of landlords with no mortagage at all…. there has also been talk of “rent controls” being put in place to cap rent charged by Landlords …let’s hope they are a long way off. Also epc controls to limit low rated props from being rented . Also in the next 12 mths Landlord licensing, immigration control and the “occupational contract” in Wales, so much to look forward to .lol !

Reply to the comment left by “Simon Dewsberry” at “11/07/2015 – 18:13“:

No mortgage therefore no expense so must likely 40% tax payer. Revocation of the 10% wear and tear equals more tax. Unless you are operating from a charitable stance, you would put the rent up. Re rent controls – never work. It’s like having an upper price for ANY car. Last time I looked slightly more engineering goes into a Porsche than a Daewoo ( apologies if I gave offended anyone by their choice of vehicle)

Reply to the comment left by “Asif Ahmed” at “11/07/2015 – 17:12“:

Good point. Everyone’s situation and business approach will be different, tailored to their individual needs. In my experience, unless you are offering an above average product, the rent level will be governed by market trends and supply and demand. time will tell.

Hi All

I must be thick and must admit I have not heard the actual budget it yet just what I have read on forums like this.

But a lot of people are saying that 80 % of what you owe in interest payments can not be deducted from your tax bill which will mean a large increase in amount of profit available include the doing away of the 10 % fair wear and tear allowance for tax to be paid..

So does this mean that lets say you pay £100,000.00 interest only £20,000.00 will be tax exempt. Leaving you to pay tax on £80,000 as profit.

I really hope I have this wrong.

Reply to the comment left by “Neil Robb” at “11/07/2015 – 21:08“:

Neil,

The way I have been advised by my accountant is as follows:

Say, your employment income is £35000 and then your annual interest on your whole portfolio is £65k.

Therefore your total income for tax purposes under new rules would be £100k. The way it will will be worked out is as follows:

£35k taxed at source by your employer (assuming you are employed).

Next £8000 taxed @ 20% = £4000.

Then following £57000 taxed @ 40% = £22800.

You then claim tax relief of @ 20% for whole £65000 which equals to £13000.

Therefore your total tax = £22800+ £4000 = £26800 then you subtract £13000 giving you total liability of £13800.

Reply to the comment left by “Gary Mason” at “11/07/2015 – 21:26“:

No, your fax relief (20%) would be applied to your interest (finance costs) and deducted from your tax due.

You seem to be confusing income and interest here.