Clause 24 response from Tim Loughton MP

by Readers Question

10:12 AM, 28th September 2016
About 3 years ago

Clause 24 response from Tim Loughton MP

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Clause 24 response from Tim Loughton MP

This is the response I received from my local Conservative MP from East Worthing, who obviously is another one who doesn’t understand the Bill and its implications:tim

Dear Mr…

Thank you for contacting me about changes to the taxation of landlords.

I am passionate about helping small businesses thrive. But this needs to be balanced against the interests of the wider economy including home ownership rates, a fairer tax system and mitigating against any future risks.

The Bank of England outlined two risks from high and rising levels of household indebtedness: a direct risk to UK banking system, and an indirect risk to economic stability. The Government is working hard to restore this country’s economic stability and the measures you talk about will help achieve this. With the above in mind I think it is right that the Government restricts the tax relief that landlords of residential property can get.

The current tax system supports landlords over and above ordinary homeowners, with tax relief particularly benefiting wealthier landlords with larger incomes. Every £1 of finance cost they incur allows them to pay 40p or 45p less tax.

The Changes to Mortgage Interest Relief do not tax landlords on turnover as opposed to profit. Rather, they remove mortgage interest from what is qualified as ‘allowable expenses’. Maintenance and repairs (along with agents’ fees, legal fees, insurance, utilities, and service charges) are all still ‘allowable expenses’ and thus still tax deductible.

Changes to Stamp Duty Land Tax are part of the Government’s strategy to improve home ownership. It cannot be right that in many areas local people are being priced out of a home. Many second homes are cash purchases that aren’t affected by the restrictions on mortgage interest relief; and many of them are bought by those who aren’t resident in this country.

Less than 1 in 5 individual landlords are expected to pay more tax as a result of the restriction to Mortgage Tax Relief. Furthermore, this change is being introduced gradually from April 2017 over 4 years. This will give landlords time to plan for and adjust to these changes.

Thank you again for taking the time to contact me.

Yours sincerely

Tim Loughton MP
Member of Parliament for East Worthing & Shoreham



Comments

Mark Alexander

15:20 PM, 28th September 2016
About 3 years ago

Reply to the comment left by "Chris Clare" at "28/09/2016 - 15:18":

Same as financing a car, either it is used for business purposes or it isn't - SIMPLES!
.

Chris Clare

15:22 PM, 28th September 2016
About 3 years ago

Reply to the comment left by "Mark Alexander" at "28/09/2016 - 15:20":

I can assure you Mark (just in case your wondering) I do not live with my tenants haha. Therefore it is completely business.

Mark Alexander

15:27 PM, 28th September 2016
About 3 years ago

They would be your lodgers if you did, not tenants - GOTCHA LOL 🙂

PS - perversely, if they were lodgers you get the first £7,500 tax free!
.

Chris Clare

15:35 PM, 28th September 2016
About 3 years ago

Fair point well made sir lol

Chris Clare

15:41 PM, 28th September 2016
About 3 years ago

What seriously confuses me is the statistic that only 1 in 5 landlords will be effected.

Surely that then means that 4 in 5 landlords either don't have a mortgage or are below the high rate threshold even with their rent added in, because anyone with a mortgage along with income and rent that puts them into high rate tax will most definitely be effected.

I find it difficult to believe that this will only represent 20% of the landlord population. Unless he meant to say 1 in 5 landlords won't be effected, that makes sense now!

Mark Alexander

16:03 PM, 28th September 2016
About 3 years ago

Reply to the comment left by "Chris Clare" at "28/09/2016 - 15:41":

Hi Chris

Apparently 50% of all landlords have no mortgages at all.

Most landlords have only one property, many of them are accidental landlords, e.g. Boy meets girl and they move in together and let one of their properties.

On this basis 20% does make sense, however, the affected 20% probably borrow 80% of all BTL finance (Pareto principle)
.

Chris Clare

16:18 PM, 28th September 2016
About 3 years ago

That makes sense but also concerns me more.

If it is indeed only a small populous of people being effected they are even more unlikely to overturn the decision as politics is about appeasing the majority.

What I would like to know is how many housing units those 20% of landlords control and consequently how many families live in them, all of a sudden that starts to become a political majority.

Mark Alexander

16:25 PM, 28th September 2016
About 3 years ago

Reply to the comment left by "Chris Clare" at "28/09/2016 - 16:18":

We submitted an FOI request to HM treasury on that basis, they don't know.

We have calculated the figure at over two million affected tenants.
.

Chris Clare

16:29 PM, 28th September 2016
About 3 years ago

Which could equate to five million people approximately four million voters possibly. Still less than 10% of the overall population ;-(

Mark Alexander

16:46 PM, 28th September 2016
About 3 years ago

Reply to the comment left by "Chris Clare" at "28/09/2016 - 16:29":

Here's a link to the info I was thinking of https://www.property118.com/new-landlord-tax-could-affect-tenants/83886/
.

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