Summer Budget 2015 – Landlords Reactions
2:00 PM, 8th July 2015, 11 years ago
9619
Categories:
The concern is;
Budget proposals to “restrict finance cost relief to individual landlords”. 
To calculate the impact of this policy on your personal finances download this software
Tags:
Budget 2015 Campaign
Comments
Have Your Say
Every day, landlords who want to influence policy and share real-world experience add their voice here. Your perspective helps keep the debate balanced.
Not a member yet? Join In Seconds
Login with
or
Member Since September 2015 - Comments: 1013
11:58 AM, 6th October 2016, About 10 years ago
Reply to the comment left by “michael fickling” at “06/10/2016 – 08:28“:
@Michael
I totally agree with your sentiments but
“………….as the more you borrow then under this clause the more tax you pay.”
is not actually correct, and is common misconception.
Take for example if I had £90k gross rental income, £25k other costs (maintenance, agent fees, insurance etc), and £45k interest, and say I had £45k salary/other income. Under Sec.24 my deemed taxable profit is £90k-£25k = £65k and pay tax at 40% of this i.e. £26k but I get an allowance of 20% of the interest i.e. 20% x £45k = £9k so my tax bill is £26k-£9k = £17k. The effective rate is 85%!
If interest cost goes up (either from a remortgage or rate increase) to say £60k the taxable amount remains at £65k (£90k-£25k) but my interest allowance is now 20% x £60k = £12k; so my tax payable is now £26k -£12k = £14k. A reduction of £3k tax payable. BUT (and this is the rub) the actual before tax profit has fallen from £20k to only £5k so the effective tax rate has rocketed to a staggering 280%!!
Under the old rules £20k profit would have been taxed at 40% i.e. £8k payable, and with the higher interest costs the £5k profit would be only 40% of £5k i.e. £2k
N.B. there would also be income tax payable on the £45k salary/other income. I’ve juggled the figures to avoid the Additional Rate tax band and the loss of personal allowance. But if you are in receipt of Child Benefit then this would be effected.
Member Since October 2013 - Comments: 804
1:58 PM, 6th October 2016, About 10 years ago
Any Info on the court case ?
Member Since December 2013 - Comments: 7
2:48 PM, 6th October 2016, About 10 years ago
Judge has ruled against a judicial review! Bad luck. We need to go down the political route and lobby MPs etc.
Member Since February 2016 - Comments: 977 - Articles: 1
2:49 PM, 6th October 2016, About 10 years ago
This is a terrible outcome. The government is triumphant. What went wrong, do we know?
Member Since October 2013 - Comments: 804
2:50 PM, 6th October 2016, About 10 years ago
Time to restructure I’m afraid the elite win again
Member Since February 2016 - Comments: 977 - Articles: 1
2:54 PM, 6th October 2016, About 10 years ago
Reply to the comment left by “NW Landlord” at “06/10/2016 – 14:50“:
For us restructuring is not an option. I do not have many hopes with lobbying MP, spend hours earlier this year and all in vain.
Only the action of raising rents and evictions from ALL landlords can possibly some result.
Member Since October 2013 - Comments: 804
3:08 PM, 6th October 2016, About 10 years ago
Why isn’t it an option ? I may have a solution for u and there really isn’t nothing to loose. All my tenants are going to be contacted with the tenant tax stuff either with eviction to sell for my good ones and rent increases on the other what a farce
Member Since October 2016 - Comments: 7
3:52 PM, 6th October 2016, About 10 years ago
Restructuring doesn’t work for me so I’ll continue with the lobbying and rent increases. My plan is to gradually sell down through retirement so if I incorporate it would end up being even less tax efficient as I sell properties off and then try to withdraw the capital from the company.
I think a company structure can be efficient when building a portfolio but if trying to withdraw rental income from it and capital gains on sales the tax can be higher than individual. Add to this the cost of incorporating and the higher interest rates on mortgages and it really is a non starter.
Member Since October 2013 - Comments: 804
3:55 PM, 6th October 2016, About 10 years ago
I really think setting up ltd to take option contracts on all the properties is a goer I really do
Member Since October 2013 - Comments: 804
4:06 PM, 6th October 2016, About 10 years ago
With all due respect these MPs are a waste of your good time and energy. This is happening and it’s down to us to find a way to battle through and 100% this will be scrapped as it is unsustainable it’s going to be survival of the fittest option agreements are the answer for me