Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Ros .” at “13/07/2015 – 19:47“:

As a freelance contractor working through my own limited company….I have had my whole business model severely impacted by legislation (ir35) that dictates that I should be taxed as an employee and not a company…..A law which has cost me in the 10’s of thousand each year. The latest budget will impact me yet again as now the dividends I take out from my company will now be taxed.

Thousands of consultancy companies have been affected….and the government response is to persue us with more rigour. I see similarities with what government is doing now for btl. …so I feel…I can’t see them making a u turn on this anytime soon.

Reply to the comment left by “Mark Alexander” at “13/07/2015 – 19:43“:

Mark, i like this , it also has the effect of averaging down top heavy & neg eq props within the portfolio. …and brings 40/45% liability down to 18%. Just need a lender that can compete with MX rates! What other issues will this set up throwup tho ?

Reply to the comment left by “Simon Dewsberry” at “13/07/2015 – 22:45“:

Forget MX rates and think Paragon rates and fees at 75% LTV.

Not good in comparison to MX rates but better than the alternatives as we know them now.

I’m not panicking just yet. I’ve already come up with 3 schemes in as many working days. I don’t have a monopoly on good ideas either, there are plenty around more clever than me.

We also don’t know the full extent of the legislation yet, it needs to go to consultation first.

This could all be a storm in a tea cup.
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Reply to the comment left by “Jason E” at “13/07/2015 – 22:25“:

I agree Jason – that is exactly what will happen. Rental profit is not a CG ….

Reply to the comment left by “Mark Alexander” at “13/07/2015 – 22:28“:

So two scenario’s one pre tax change, one post when it’s full effect. To make it simple lets assume I have no other income and 25K property costs other than my interest on the mortgages.

My total rent is £150K, my interest is £75K, my costs are 25K so my actual profit pre tax (money in the bank) is £50K.

Pre 2017 scenario –
My tax is calculated on actual profit, £50K which just pushes me into the 40% band but I get my full personal tax free allowance and pay most of my tax at 20%.

Post 2021 scenario
My tax is calculated on taxable profit i.e. actual profit plus my finance costs but I get 20% tax relief on my finance costs.

My taxable profit is £50K + £75K = £125K so as well as pushing well into the 40% zone my finance costs push me over £121200 so I’ve lost my tax free personal allowance. I then get my total tax bill reduced by 20% of £75K

??????

Jason

Reply to the comment left by “Jason E” at “13/07/2015 – 23:07“:

… if this is correct then the actual numbers are

Pre 2017 Actual Profit £50K, tax £9403, take home £40,597
Post 2021 Actual profit £50K, tax £28,643, take home £21, 357

I only mention this as I don’t know how much the government will negotiate when this all gets discussed but the loss of a personal allowance because of loan does seem particularly silly.

Jason

Reply to the comment left by “Jason E” at “13/07/2015 – 22:25“:

Mark ths is what Jason ia refering to :

Income over £100,000

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £121,200 or above.

https://www.gov.uk/income-tax-rates/income-over-100000

More pain I’m afraid.

Reply to the comment left by “Ros .” at “13/07/2015 – 19:47“:

Agreed Ros, and this was what I meant in my post this morning
https://www.property118.com/budget-2015-landlords-reactions/76164/comment-page-35/#comment-58233 ie. a letter or email in a format which was general enough for everyone to use and which expressed simply and clearly the potential catastrophe facing us if the budget proposals go through,

Reply to the comment left by “Simon Dewsberry” at “13/07/2015 – 23:56“:

Best I find a solution then, otherwise I’m completely screwed. My interest alone is higher than that figure!
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Reply to the comment left by “Anne Nixon” at “13/07/2015 – 23:58“:

Anne,

I received an email earlier from my Accountant advising that, HMRC has already invested £1 million pounds to upgrade their systems to allow for this change therefore they are unlikely to do any U turn!

But I still remain optimistic!