Summer Budget 2015 – Landlords Reactions

Summer Budget 2015 – Landlords Reactions

14:00 PM, 8th July 2015, About 7 years ago 9619

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Budget 2015 - Landlords Reactions

The concern is;

Budget proposals to “restrict finance cost relief to individual landlords”Summer Budget 2015 - Landlords Reactions

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Comments

Jay James

20:20 PM, 8th July 2015, About 7 years ago

Reply to the comment left by "Dan Smith" at "08/07/2015 - 17:41":

1. No.

2. Tax paid by higher rate tax payers, (relating to mortgage interest amounts).

3. Yes, all of business mortgage interest will continue to be entered as an expense in accounts, thus reducing rental income.

However, if your overall income (after all of business mortgage interest is deducted) puts you in the higher rate tax bracket, then you will pay a percentage of your mortgage interest as tax. The percentage will be your highest rate of tax less 20 percent.

stephen stanley

20:26 PM, 8th July 2015, About 7 years ago

Hi

I still don't get how to work this out,

If my annual income is 42k after costs Just below 40% threshold) and including interest charges of 10k I would be unaffected.
what would be the maths if my income was 52k?

Can anyone help

Btw with interest payment increasing next year its going to make this a lot worse

20:26 PM, 8th July 2015, About 7 years ago

Dan put simply : for every £1 of mortage interest paid you get tax relief of 20p , 40p or 45p ie you dont have to pay any tax on it. Todays proposal is that you can only claim upto 20p .....

If you are a basic rate tax payer this wont affect you as you can still get your 20p tax relief. If you pay 40 or 45 % then the other 20 or 25p is now payable to HMRC and no longer claimable.

In plain English: 40% tax rate payers will get a penalty of 20% of their annual mortgage interest payments. 45% tax rate payers will get a 25% penalty of total mortgage int payments. ..as they will now only be able to "benefit" from 20% tax relief max.

...as we understand it so far .

Mark Alexander - Founder of Property118 View Profile

20:31 PM, 8th July 2015, About 7 years ago

Reply to the comment left by "Simon Dewsberry" at "08/07/2015 - 20:26":

Good explanation!

Sadly
.

Romain Garcin

20:33 PM, 8th July 2015, About 7 years ago

Reply to the comment left by "Jay James" at "08/07/2015 - 20:02":

Well, if the tax-relief is the same as that of a 20% tax-payer in effect it means that not all of the interests paid can be used to calculate the taxable profit.

Therefore you might find yourself in a situation where you have made not actual profit but still have a taxable profit to pay tax on.

E.g. £1000 rent and £1000 interests. If you are a higher tax payer and the tax-relief on the interests is limited at £200 you still have to pay £200 tax.

Basically only HALF the interests paid count as allowable expense.

Gary Nock

20:39 PM, 8th July 2015, About 7 years ago

But we dont get "tax relief" on our interest payments. The use of this term appears misleading. If we still claim 100% of our interest payments against profit are HMRC saying that if you pay 40 or 45% tax you can't claim 100% anymore.

Confused. So are my accountants.

20:40 PM, 8th July 2015, About 7 years ago

Reply to the comment left by "Romain Garcin" at "08/07/2015 - 20:33":

unless you pay 45% tax and then £250 is due ..... happy days NOT.

Mark Alexander - Founder of Property118 View Profile

20:53 PM, 8th July 2015, About 7 years ago

Reply to the comment left by "Gary Nock" at "08/07/2015 - 20:39":

It's semantics Gary, I regularly point out on this forum that we don't get tax relief but we are allowed to offset expenses against income.
.

Phil Landlord

21:06 PM, 8th July 2015, About 7 years ago

This is clearly creating confusion. There are lots is scenarios need thinking through.
Employed earned income and rental income have been seperste to avoid well paid employees using rental losses to offset earned income from employment.
My rents are now in a modest profit - but are being used to offset the previous losses. I imagine I will therefore not be able to offset as much interest. Sure it will clearer in a while

Mark Alexander - Founder of Property118 View Profile

21:10 PM, 8th July 2015, About 7 years ago

OK, so now we are all pretty clear on what the implications are, what next?

I am in the process of remortgaging several of my properties to 85% fixed for 5 years but now I must re-think this.

Should I sell up? Maybe, but the CGT is horrendous!

Maybe I should remortgage to the max and wait for distressed sellers? I'm sure there will be plenty of these and the LPA receivers may well get very busy come 2017 and they won't be wanting to hold highly leveraged assets that are losing money but still incurring tax liabilities for too long! Will we see early 90's style fire sale opportunities? If so, cash will be king!

Will lenders change their notional rates to reflect the new cashflow issues? If they do borrowing will get tougher, and as we know, this drives property values down too.

Will mortgage brokers see another crash in applications?

Will BTL purchases in progress be aborted? If so this will hit estate agents and developers.

Will developers be able to continue to build if they lose the BTL off plan speculators which they are so reliant upon to get funding these days?

On balance, I think all those who have huge amounts of cash or the ability to raise it quickly are in for some rich pickings, leaving the rest with major difficulties to endure.

Maybe I will refinance at high gearing and a long term fixed after all?

What are your thoughts?
.

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