Summer Budget 2015 – Landlords Reactions

find your MP here:
http://www.parliament.uk/mps-lords-and-offices/mps/

Reply to the comment left by “Ros .” at “14/07/2015 – 20:49“:

As Ros says we need to make a lot of noise quickly.

Landlords can be their own worst enemy with their relentless optimism. We cant deny that the market has been favourable to landlords, but so many younger landlords seem to think that easy times will continue, we will get over this little bump, houses will always double every x years etc. From this low point in the interest cycle, the next 20 years in the property market will show nothing like the capital growth of the last 20 years.

In the words of Louis XIV’s finance minister, Colbert, “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” We need to be hissing and honking like fury, until the Chancellor decides it is easier to find another goose to pluck. Mark has provided an example of a letter to an MP and there are plenty of strong arguments to apply among the replies to this discussion.

We have a really strong case that the Chancellor’s proposals are not addressing the problems in the housing market and that he is set to destroy one of the largest industries in the small business sector. All for the politics of envy.

First, the attack on landlords is being used as a substitute for the only real solution to the housing shortage and high prices – to seriously free up planning controls.

HMRC’s Policy Paper on the proposal starts its Policy Objective paragraph with “To make the system fairer…” however this proposal does nothing of the sort. Private landlords to be made to play on an uneven playing field against both home owners on the one side and property companies on the other.
1. Home owners enjoy the substantial advantages of:
a. CGT relief
b. Inheritance tax relief, introduced in this budget
c. Pandering to home owners, furthermore, has kept our planning laws tight and caused the shortage of properties and high house prices.
2. Property companies can offset the cost of financing in full. There is no justification for removing interest relief in the income tax regime but not under corporation tax.
3. The individual landlords who are least affected are the richest, who have invested cash without the need for finance. Many of these are foreign investors who are so rich that they keep their properties empty. These are the only landlord investors who are not operating a business, they are reducing the supply of usable housing, yet they are untouched by the budget.

Where the Chancellor is on the weakest ground is on the taxation of non-existent “profits” as this goes against a fundamental principle of taxation, that you tax where there is a capacity and ability to pay. This is difficult for him to justify.

Thinking of alternative, fairer ways of taxing landlords, if we have to play our part in reducing the deficit: the tax increase that was announced on dividends could be applied to landlords’ actual net income; a 7.5% surcharge over 5k. Although we do not want to suggest that rental income is unearned investment income.

Reply to the comment left by “Appalled Landlord” at “14/07/2015 – 21:01“:

But as per Simon Lever example, only 33,500 of the 51,000 interest in Gary’s figures could have the 20% relief applied and used that year, is that right?

6700 and not 10,200.

If yes I’ve just twigged to another aspect I hadn’t picked up on. ( even though I thought I had it)

I think, whichever way we look at we’ll be 20% worse off by paying 20% extra tax on you total interest as Neil said, there are different methods but end result is same.

Reply to the comment left by “Appalled Landlord” at “14/07/2015 – 21:01“:

Personal allowance = £10,600

Reduction in personal allowance with income over £100,000 is £1 for every £2 of income.

So there is no personal allowance where income exceeds £121,200

Reply to the comment left by “Gary Mason” at “14/07/2015 – 20:31“:

No Gary, we will not continue to pay tax as it has been.

We will pay tax on a much bigger figure because HMRC will not deduct finance costs from rent received when it works out what it considers to be our profit.

From 2020/21, this profit will be bigger than it currently is by the amount of interest. This might take someone from the 20% band into the 40% band.

Once it has calculated the tax on this profit, HMRC will deduct a relief of 20% of the finance costs, and we will pay the remainder. But this 20% will be a lower rate than oureffective tax rate, so we will be worse off.

Reply to the comment left by “Ros .” at “14/07/2015 – 20:49“:

Hi Ros

Not all landlords are being discriminated against – just those who bought properties in theit own names, not those who bought them through companies.

Reply to the comment left by “Appalled Landlord” at “14/07/2015 – 21:45“:

That’s exactly what I explained, so where is the misunderstanding? Appalled Landlord, could you also send me an email so I will have chat with you.

Reply to the comment left by “Gary Mason” at “14/07/2015 – 21:10“:

Hi Gary

No, I haven’t moved the goalposts. Might you have misunderstood?

And yes, thisproposal is madness.

Reply to the comment left by “Jack D” at “14/07/2015 – 21:31“:

No Jack. the taxable profit, at £84,500, is higher than the interest amount, so he gets 20% of the full £51,000.