Summer Budget 2015 – Landlords Reactions

Interesting article on an Irish news website. Im not sure if people are aware but the Irish government reduced the level at which landlords could offset their mortgage interest to 75% after the recession to try and bring in more tax revenue. This has led to a massive increase in rents as landlords try to recoup money to pay tax bills. The government are now taking about allowing the full relief back up to 100% of mortgage costs in return for capping rent levels during the time the tenant resides at the property. See link below:

http://www.breakingnews.ie/ireland/landlords-blame-tax-system-for-rising-rents-691439.html

Reply to the comment left by “Charmaine ******” at “05/09/2015 – 11:49“:

Hi Charmaine
It is difficult to put in words the impact of the new proposal.
My understanding is “They are not allowing you to deduct financial costs from rental income – which effectively means being taxed on the financial costs – but are giving back 20% of the financial costs”.

Reply to the comment left by “Ros .” at “04/09/2015 – 23:15“:

FOI request submitted for no. 3 🙂

Hi Can I have your help please …….

before I send it , Is this follow up e mail broadly correct which I intend to send to Mr Fallon MP in answer to his question “why is it unfair to treat all landlords the same and allow relief at 20%”

Mr Fallon,

Thank you for your time today.

I would like to follow up on one point you made which is “why is it unfair to treat all Landlords the same and reduce relief for all to 20%. ”

The only reason mortgage tax relief is at 40/45%currently is because the rental profits are also being taxed at this level. So £1 extra of ANY expense means £1 less profit and therefore 40/45p less tax to pay i.e. tax relief of 40/45%.

If the rental profits were taxed separately from a persons’ other income at a rate of 20% (as incorporated Landlords do), then there would only “tax relief” of 20p for each £1, as is the case for basic rate taxpayers.

If we are to pay tax on our deemed profits , (which includes the adding back in of mortgage finance costs thereby artificially inflating profits ) upon which we are then taxed at 40 % or 45%, to then only allow 20% of tax relief on those costs is clear unfair and does not treat all landlords equally.

I invited you to read some of the worked examples I provided you with which illustrate the point and I hope these help to demonstrate why to reduce the the tax relief to 20% for all is grossly inequitable and penalises higher rate taxpayer disproportionately. .

Thanks for your help guys.

Reply to the comment left by “Charmaine ******” at “05/09/2015 – 14:36“:

It probably affects middle earners proportionately more, looking at their whole effective tax rate rise, as per this graph I prepared. Maybe send across that graph, it’s a picture file so you can copy and paste.

http://www.comfortlettings.co.uk/files/images/Effective%20Tax%20Rate.png

Which is part of the blog that was linked earlier:

http://www.comfortlettings.co.uk/blog/2015/08/29/budget-2015-buy-to-let-mortgage-interest-tax-consequences

Reply to the comment left by “Darlington Landlord” at “05/09/2015 – 14:24“:

@Darlington LL

Thanks

Who is up to post Q4?

Reply to the comment left by “Manchester Landlord” at “05/09/2015 – 13:38“:

This article is a really good example of why GO’s plan is a bad idea and will lead to rent rises.

I like the way they point out that the majority of the rent actually goes to the taxman not the landlord, similar to the campaigns which highlighted how much tax is paid on a gallon of petrol and how much on a pint – much more accessible for people to understand than trying to explain about expense deductions and tax allowences.

“Information officer with the IPOA, Margaret McCormick, said that that landlords end up making very little profit on properties.

“Rents are rising because the cost of providing rental accommodation is rising,” she said.

“Renters would be shocked to note that approximately 62% of the rent they’re paying is going straight back to the Government in the form of income tax, USC, PRSI, and the local property tax.

“So for a landlord on a rent of €1,000 per month, the Government takes €620 of it, expenses take around €150, and the landlords keep €230.

“The tax treatment is what is causing the difficulties in this sector.” “

Reply to the comment left by “Charmaine ******” at “05/09/2015 – 14:36“:

Hi Charmaine

Perhaps you can explain to the MP that landlords are not getting “relief”. It is not like MIRAS was, where we deducted mortgage interest from our salaries before the tax was calculated.

We deduct interest from our receipts, like landlords in every other country in the EU, and like every other enterprise in the UK. The use of the word ”relief” is designed to confuse people.

Then you could tell him that Treasury’s claim that: “By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system.” is the OPPOSITE of the truth.

Finance costs incurred by individual landlords will be treated DIFFERENTLY by the tax system. Some landlords will be unaffected, some will pay a levy on their finance costs of up to 20% and possibly lose the personal allowance, and others will pay a levy of up to 25%.

And you could add that this lie brings shame on the Treasury, as its Civil Servants know the truth..

Reply to the comment left by “Manchester Landlord” at “05/09/2015 – 13:38“:

This article is a really good example of why GO’s plan is a bad idea and will lead to rent rises.

I like the way they point out that the majority of the rent actually goes to the taxman not the landlord, similar to the campaigns which highlighted how much tax is paid on a gallon of petrol and how much on a pint – much more accessible for people to understand than trying to explain about expense deductions and tax allowences.

“Information officer with the IPOA, Margaret McCormick, said that that landlords end up making very little profit on properties.

“Rents are rising because the cost of providing rental accommodation is rising,” she said.

“Renters would be shocked to note that approximately 62% of the rent they’re paying is going straight back to the Government in the form of income tax, USC, PRSI, and the local property tax.

“So for a landlord on a rent of €1,000 per month, the Government takes €620 of it, expenses take around €150, and the landlords keep €230.

“The tax treatment is what is causing the difficulties in this sector.” “

Reply to the comment left by “Manchester Landlord” at “05/09/2015 – 13:38“:

This article is a really good example of why GO’s plan is a bad idea and will lead to rent rises.

I like the way they point out that the majority of the rent actually goes to the taxman not the landlord, similar to the campaigns which highlighted how much tax is paid on a gallon of petrol and how much on a pint – much more accessible for people to understand than trying to explain about expense deductions and tax allowences.

“Information officer with the IPOA, Margaret McCormick, said that that landlords end up making very little profit on properties.

“Rents are rising because the cost of providing rental accommodation is rising,” she said.

“Renters would be shocked to note that approximately 62% of the rent they’re paying is going straight back to the Government in the form of income tax, USC, PRSI, and the local property tax.

“So for a landlord on a rent of €1,000 per month, the Government takes €620 of it, expenses take around €150, and the landlords keep €230.

“The tax treatment is what is causing the difficulties in this sector.” “