Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Ros .” at “18/08/2015 – 14:39“:

Ahem…. For RLA and Rentify it’s on saynotogeorge.co.uk . 65% and 56% respectively.

Reply to the comment left by “Ros .” at “18/08/2015 – 14:39“:

That, from John McKay, and this from NLA –

Not a percentage, but monetary figures:
http://www.landlords.org.uk/news-campaigns/news/it%E2%80%99s-not-landlords-the-chancellor-has-screwed-it%E2%80%99s-tenants

It’s not landlords the Chancellor has screwed, it’s tenants
Article Posted – 8 Jul 2015

Responding to the Chancellor’s Budget announcement to restrict the rate of mortgage interest relief the basic rate of 20% from 2017, Richard Lambert, Chief Executive Officer, National landlords Association (NLA), said:

“The Chancellor’s unwavering commitment to homeownership blinds him to the impact of the policies he proposes on the hard-working people he claims to champion.

“This move does nothing support wider housing provision and will ultimately make Mr Osborne responsible for adding £840 per year – or £70 per month – to rents”.

Reply to the comment left by “Connie Cheuk” at “18/08/2015 – 15:09“:

Great. Thanks Connie and John. That was doing my ‘ead in. I’ve just spoken to SAL as well and their survey results haven’t been collated yet, but they’ll give me a figure if they’ve got it – my message has been passed on. In the meantime I’ve got the RLA, Rentify and the NLA thanks to you and that should do anyway, if I don’t get the other one in time.

Hi Ros

I was searching internet to see if I could find any facts and figures came across the following.

East Midlands residents were hit hardest, with 48 per cent of local letting agents reporting a rise in rents, compared with 17 per cent of agents in Wales.
And it looks like renters’ misery is set to continue as 80 per cent of the agents surveyed predicted that private rents will soar in the next five years, as the impact of the summer Budget feeds through to the buy-to-let market.

“Most private landlords are not “getting rich off the taxpayer
The Strategic Society Centre said there was a huge disparity between private landlords and tenants, which threatened to undermine the government’s attempts to help new homebuyers by boosting the supply of new homes.
The SSC’s analysis of the sector, based on official figures, found that private sector landlords tended to be wealthier than the general population, with an average of £75,103 held in savings, bonds and other investments. In contrast, private renters had an average wealth of £9,506. While 50% of landlords had accrued wealth of up to £20,500, the same proportion of tenants had just £398.
Landlords were older than tenants, with an average age of 48, compared with 32 among renters, and three-quarters were in employment, bringing in a salary alongside rental income. They were also more likely than the general population to have grown up in owner-occupied homes, with three-quarters living as a teenager in properties owned outright or through mortgages, compared with 56% across the population.
The majority of landlords did not have vast portfolios of homes – 72% owned just one buy-to-let property alongside their main home – and around 50% made £500 or less a month from their rental property.
However some landlords clearly received substantially more though, as the average rent across the board was £1,493 a month.
Writing in one of two Whose Home? reports released by the centre, James Lloyd, said that although they only represented 2% of the population, private landlords were in “a privileged position compared to other social groups (including tenants) whether in relation to earnings, wealth or the size of their homes”.
“Most private landlords are not “getting rich off the taxpayer”, but instead are receiving transfers of income and wealth from tenants, who are significantly poorer than they are. In this way, it would appear that the PRS [private rental sector] increases wealth inequality in society,” Lloyd wrote.
He said action needed to be taken to address the “equity advantage” and recommended restrictions on new-build properties, so they could not be purchased with a buy-to-let mortgage and short-term tenancy agreements could not be granted on homes that were less than three years old.
He also suggested restricting the amount of buy-to-let lending banks could do, for example to 5% of their book, to restrict the availability of credit to private landlords, and a review of the taxes levied on second properties.
Recent years have seen a surge in the number of people renting as a result of high prices and mortgage lenders’ reluctance to offer loans to people with small deposits. In 2000, around 2m households were in private rented accommodation, but that had risen to 3.6m in 2010/11.

PROPOSED POLICY WILL MAKE IT WORSE!
Rising rents have added to the difficulty of building a big enough deposit to fund a purchase, with housing charity Shelter recently saying that in some areas would-be buyers now needed to save for more than a decade.

My daughter as FTB just offered on a house…asking price £360k…it was an open day and apparently there were about 100 people there. An offer was accepted at £430k! You’re not telling me that any landlord would have been offering at that price! We are not the cause of the property price raise…..they just need to build more b….y houses.

Reply to the comment left by “KATHY MILLER” at “18/08/2015 – 15:50“:

Er … I don’t think this proves cause and effect. All it shows is that many people who have saved money (or inherited it) become landlords, and that poorer people, many of whom don’t have savings (perhaps because they are younger), rent their homes. Well, duh!

Reply to the comment left by “Lisa Stux” at “18/08/2015 – 16:50“:

Quite. And lower end houses, at that. I also don’t see what’s wrong with having to save for 5-10 years to buy. My parents saved for 8. We were lucky and managed to save enough after 4 years (but we had to live apart to do that, with parents and in awful one room lodgings)

Reply to the comment left by “Lisa Stux” at “18/08/2015 – 16:50“:

I have been invited to many Open House Events. This drives up the prices and Landlords have margins, so they don’t want to lower their yield even more. I doubt sensible Landlords would attempt to fight other buyers for a property.

In one event, I did offer but was told someone had offered higher. I increased my offer, only to be told by the Lender that the property wasn’t worth that much. I didn’t go through with the purchase. Good luck to whoever did. Estate Agents do try to get away with this tactic (one of many), especially in a rising market. They do this frequently in Portsmouth because two up two downs go like hotcakes. The flats I have bought, I had no competition. Two of the Vendors needed to move desperately (one had a job up North) and another needed to move into a house with a garden for his young boy. I didn’t notice FTBs fighting for the flats. They were in fact on the market for a quite a while.

Reply to the comment left by “Matthew Dervin” at “18/08/2015 – 12:10“:

Dastardy Osborne indeed, but the fact is that Landlords do add a great deal to the tax coffers anyway. I expect to pay more tax now that I have more income. However, I don’t expect to be literally robbed in what I consider my business that I have created off my own back and using a great deal of my own finance. I am sure that I could if I wanted to, sponge off the government, swan about town with a fake tan with a can of lager and a fag in my hand, a tattooed man on my arm and four kids in tow. Plenty of families in the town in which I reside. No, instead, I actually wanted to earn money and do something to better myself and my future, which is the whole point of enterprise.

I expect my rental income to be taxed. However, I don’t expect my interest that I pay to my Lender, in a private arrangement to be taxed. My payment is already the interest. This is my cost of borrowing from my Lender. It is a cost in any other business, and allows any other business to not add this to be calculated as taxable. Don’t even go there with the rhetorical ‘relief’. This has Doublethink and the Thought Police all over it. Our chocolate rations were never doubled to begin with, to justify it being halved! George Orwell would turn in his grave! Ridiculous!

Are these figs to be believed from Megan Shaw, i’m struggling to do so?

http://www.accountingweb.co.uk/anyanswers/question/summer-2015-budget-interest-relief-restrictions-btl-properties

Response from HMRC-Editor to note! 3 thanks
Ian McTernan CTA | Wed, 08/07/2015 – 21:19 | Permalink

I emailed the people responsible, here’s the text of the reply (apparently wear and tear allowance is unfair on landlords too..):

Hi Ian,

Thank you for your email.

You are correct – this is how the basic rate mechanism will work. For completeness, in your example, from 2020/21 their calculation (using 16/17 tax rates) will be as follows:

Property profits:

Rental income 250,000

Non-finance expenses (100,000)

150,000

Income tax calculation:

43,000 @ 20% 8,600

107,000 @ 40% 42,800

51,400

Tax reduction (30,000) [150,000 @ 20%]

Total tax 21,400

Only around 1 in 5 (18%) of individual landlords are expected to pay more tax as a result of this measure, with only 10% expected to pay more than £500 in additional tax and only 1% expected to pay more than £5,000 in additional tax. These landlords will typically have higher value property portfolios, larger rental income and larger finance costs.

This change ensures all individual buy-to-let landlords will receive the same relief for their finance costs, reducing the advantage wealthy landlords may have in the property market. Landlords who are basic rate or non-taxpayers will only lose out if they have finance costs which currently receive relief at higher or additional rates of tax, such as if their finance costs and rental income are very large. The government expects around 94% of landlords who will have to pay more tax will have a taxable of income over £35,000. Of the 6% with taxable income under £35,000 and who have to pay more tax, they have an average (pre-tax) rental income of £64,380 and own on average 6 properties.

To give landlords time to adjust the government is introducing this change gradually from April 2017 over 4 years.

The government does not expect this to have a large impact on either house prices or rent levels due to the small overall proportion of the housing market affected (there are 1.6m buy to let mortgages outstanding in the UK overall, out of a total private rented sector of 4.4m households and total housing stock of 22.6m households in England). As above, only around 1 in 5 (18%) individual landlords are expected to pay more tax as a result of this measure. The OBR believe the impact on the housing market will be small and, taking account of the other measures in the budget, have not adjusted their forecast for house prices.

The Government will also reform the unfair Wear and Tear allowance. This will allow landlords of all residential properties (excluding Furnished Holiday Lets) income tax relief on the cost of renewing furnishings provided in their properties. All landlords will now be able to offset the costs of renewing furnishings in their properties which should lead to improvements in tenancy conditions.

Megan Shaw
Product Owner – Property Income & REITs
HMRC, Room 3/64, 100 Parliament Street, London, SW1A 2BQ
03000 585628