Summer Budget 2015 – Landlords Reactions

Very good coverage in the Telegraph today. Well done Connie and Richard Dyson.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816726/Buy-to-let-tax-My-five-properties-were-my-pension-now-my-tax-bill-will-jump-38pc.html?fb_ref=Default

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html?fb_ref=Default

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816733/Alice-in-Wonderland-buy-to-let-tax-sets-a-new-benchmark-in-absurdity.html?fb_ref=Default

Reply to the comment left by “BTL INVESTOR SCOTLAND” at “22/08/2015 – 09:21“:

Indeed a superb article and a whole page of space given over to the cause. I’m texting RIchard Dyson now to thank him. Absolutely fantastic and accurate coverage.

Reply to the comment left by “BTL INVESTOR SCOTLAND” at “22/08/2015 – 09:21“:

Picture of me smelling something bad, probably the stench of the tax…

I have just sent the following to Richard Dyson ….

Hi Richard

Great little article regarding Connie today, thanks for that.

If you would like to follow this up and support the campaign further I will be happy to introduce you to Jerry Jones, who recently wrote the following to his MP ….

Dear Mr Penrose,

Thank you for your letter, which is pretty much a summary of the Chancellor’s justification for this wholly unreasonable change in the taxation of landlords’ finance costs. You asked me to let you know if you had missed anything out, so I am doing as you requested.

I reject the idea that landlords have an unfair advantage over either companies or homeowners.

Companies can deduct all their finance costs from income before paying tax on their resulting profits at the rate deemed appropriate, as can sole traders in any business other than property letting (see the example below for the effect that this change will have on property letting businesses that are run on a sole trader basis). Money necessarily paid out to someone else should NOT be regarded as part of taxable income of any enterprise, whatever its structure.

As to whether private homeowners are taxed less favourably than landlords, consider the impact of two homeowners swapping properties and renting to each other for identical rent amounts. By renting these same properties they are subjecting themselves both to capital gains tax if they sell, and income tax on rental income less costs. If their costs (e.g. repairs, mortgage interest) exceed their rental income, this will leave them in an inferior tax position as such tax losses cannot be offset against other (non-property) income, and they still face a potential capital gains tax liability.

I have a feeling you may not have grasped exactly what the problem is, so allow me to illustrate it with a worked example based on your own circumstances as an MP who draws a salary and expenses from the public purse.

In broad terms, your current income is composed of £74,000 salary as of May this year, plus expenses, based on the complete year of 2013-14’s figures, of just over £129,000, of which £111,000 was staffing costs. In this respect you are in quite a similar position to many landlords as regards their income. In your case the total is £203,000, of which part is taxable and part is an expense and thus deductible. On that basis, in very broad terms, you are liable for tax of around £19,000, leaving you a post-tax income of £55,000, all of the expenses income being paid out again.

Let us now consider the position if we reduced the tax relief on part of your expenses to 20%, using the same mechanism that is proposed for landlords. Because mortgage finance is usually the major expense in property, let us treat your staffing costs in the same way – MP’s expenses are no more of a sacred cow to the Great British Public than landlords’ income, so the parallel is rather appropriate – nobody will be rushing to the barricades to defend either of us.

Your taxable income is now deemed as £185,000, comprising your salary and that part of your expenses that you use to pay staffing costs. The tax liability on that income is £69,400.

“But wait”, I hear you cry, “what about the 20% tax relief due on my staffing cost?” Quite right, 20% of £111,000 is £22,200 so we can deduct that from the raw figure – your tax liability is now reduced to just £47,200, which, because all of your staffing cost expenses are actually paid out again, you must pay out of your £74,000 salary, leaving you a net income of £26,800, around half of your previous take-home pay. Good luck with running homes in Somerset and London on that income!

This is only fair of course, because as you said of landlords, reducing the tax relief on your staffing costs will “level the playing field” between MPs and ordinary citizens who don’t get tax relief for employing nannies, cleaners, gardeners and the other staff they need to support their households.

The figures are actually far worse than that for many landlords, who will be expected to pay substantial tax out of a negative cashflow.

Do you now understand the reason for our concerns?

Yours Sincerely,

Jerry RM Jones
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Reply to the comment left by “Connie Cheuk” at “22/08/2015 – 09:52“:

Connie. It’s a lovely photo. You look great! This is the best thing that has happened (in addition to being invited to the Treasury). This could be a real wake-up call – especially as the other dozing journalists pick up on it and the news spreads to other newspapers. I feel excited and encouraged. Thank God for Richard Dyson.

The links to The Telegraph article need to be posted all over Facebook, not just our own timelines but in groups too.
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Just sent the following email to Sean Rath, Policy Adviser to The Treasury – email [email protected]

SUBJECT – Article in The Telegraph

Dear Sean

Thank you for your time on Thursday, if you haven’t seen Richard Dyson’s article in The Telegraph today here’s the link >>> http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html?fb_ref=Default

Please forward this to Megan Shaw (HMRC) and her colleague who I met on Thursday.
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Reply to the comment left by “Mark Alexander” at “22/08/2015 – 10:21“:

Superb Mark!

Just heard back from Richard Dyson. He’s away for the next 10 days so obviously not able to follow up on anything we send him. He encourages us to spread the word amonst the Landlord Community (like we need encouraging!!! 🙂 )

I am currently emailing all the Daily’s with links to the article and suggesting that they take a look at it, though I’m sure they must have teams of people that do this anyway.

This coverage is a major step forward for us. Fantastic!

Stupendous! Well done Connie, Mark, John and, of course, Richard Dyson.

I’m starting to feel hopeful again!

Does anyone have contacts at the RLA and NLA that this could sent to? My emails have gone unanswered so far.

This needs to be disseminated far and wide.