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14:24 PM, 20th July 2015, About 9 years ago 35
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The following are just a selection of the emails that Property118 members have sent to George Osborne since his budget announcements affecting landlords last week.
Please feel to post yours in the comments section below ….
Dear Mr Osborne
I am writing to you to express my dismay and consternation at the proposed changes to the allowances on taxation for small landlord businesses like my own.
I have tried to provide an income for my retirement to avoid relying solely on the state pension and a meagre pension from my employer and have chosen to do without luxuries in order to build up a small portfolio of properties to provide that income and the proposed changes will destroy those plans.
As with any other small business, finance and loan interest costs are a direct running cost and the treatment of any other business in the same way as that proposed is inconceivable (a plumber not having an allowance for purchase of van etc).
If these measures are adopted a landlord having a long void due to a maintenance problem eg a fire or a non paying tenant, would still have his mortgage interest to pay but would have no income to set it against. Not only may he have no income due to the above circumstances but he would still receive a tax bill for interest he has paid on his mortgage.
Large property owning corporations and wealthy investors who have no borrowings will not be affected by these changes, it will hit hardest landlords, including basic tax payers incidentally, who have invested as individuals and who have planned their businesses from day one around the current allowances.
It is vital that a business letting property is seen as just that – A BUSINESS. Running this type of business is as complicated and time consuming as any running any other. It takes long term planning, it has overheads, it is affected by late paying and non paying customers as is any other – it cannot be right or fair that there are totally discriminatory rules for only this kind of business.
The assertion given by the chancellor that landlords paying the basic rate of tax will be unaffected by the changes has now been shown in calculations to be patently untrue, including by HMRC themselves.
Along with the extreme financial hardship caused to hard working business people – most of whom helped to put the Conservatives in office, ultimately this will inevitably also cause a reduction in the supply of privately rented housing and an associated escalation of rents for the tenants, as landlords decide the diminishing margins make letting property no longer a viable proposition.
I sincerely hope that you are able to look again at these proposals and hopefully ditch them altogether or if not then make them apply only to new investments thus not affecting businesses built on a certain previous business model.
Yours sincerely
And another ….
Dear Mr Osborne
I am most concerned about the proposals, for the following reasons:
Landlords who bought in their own names will pay tax on their interest expense, rather than on real income. Interest is a legitimate cost of our business, just as it is for any other form of enterprise in the country which borrows money to buy assets that generate taxable income.
Rental property is not a hands-off investment like buying gold bars. Being a landlord requires work. They can be called upon any day, at any hour, to deal with problems. For some of them it is a full-time job maintaining their properties and dealing with tenants and agents and the administrative and accounting work that is entailed.
If this proposal is applied to existing mortgages you will be changing the rules for people who bought 20 years ago or more. You will undermine the concept of certainty which businesses of all types of rely on.
The illustrative example from Megan Shaw, Product Owner – Property Income & REITs at HMRC, of the effect of the proposed change shows a man with a salary of £40,000 and a real rental income from one property of £1,200 after deducting interest of £10,800. Currently he is a basic rate payer.
When the interest is disallowed, he becomes a higher rate payer. His tax goes up by £1,800. So after spending his time and money looking after this property for a year he has to hand over the real profit of £1,200 to the government, plus 50%. out of his net salary. If he had a second property with the same figures, he would hand over 175% of the real profit.
This is not taxation, it is confiscation of assets by the State. The communist party would be delighted.
Even if the landlord makes a loss he will have to pay tax on the interest, out of his other resources.
If landlords have no other source of income then HMRC, a branch of the government, will make them bankrupt. The result will be divorces, suicides (single and double), and an increased burden on the state.
Lenders will lose money in the bankruptcies.
Landlords who bought in their own names will exit the sector on masse, causing a house price crash. Lenders will lose money in the crash.
Affected landlords will not start companies to buy the new-builds, so fewer homes will be built, fewer sites will be developed, so less affordable housing will be built as well. This announcement may already have had the effect of deterring purchasers.
For both reasons the amount of rented accommodation will fall, reducing the mobility of labour both within the country and from outside, and rents in the remaining properties will rise.
The IFS says the measure is wrong.
You are attacking your party’s natural supporters.
Please do not apply this confiscatory measure to existing mortgages.
Yours sincerely
and another …..
Dear Mr Osborne
Following your proposed reduction in interest relief for private landlords (whilst exempting those who have a Ltd company structure) the unfortunate full implication of this is that many buy-to-let landlords will end up paying more tax than they are actually making in profit, even paying tax after having experienced a loss!!
The other effect will be that many highly geared landlords (i.e. those with over 75% gearing on their portfolios) will face bankruptcy due to this measure and the double tax whammy of CGT hitting them as well, as they sell out.
Please also bear in mind the mass of distressed sales which will result, not to mention the thousands of rental homes which will become unavailable as a direct result of this measure, just at the time when government is seeking to provide more homes, not less.
I would like you to please reconsider this measure which is grossly unfair and discriminatory to these small business owners, (Buy to Let is without doubt a business , (and a very labour intensive one at that) and not a passive investment.
Some Positive Ideas to improve things going forwards:
1. Full U-turn on the measure
2. if not a U Turn, then an amnesty on SDLT/CGT charging for a one-off move to Ltd structure for landlords who register with a scheme within a set time frame.
3. Apply the measures only to purchases subsequent to 2017
I have spoken to Ann Milton , MP for Guildford this morning at a Conservative party breakfast, and she agrees that many ramifications of proposed new laws are often not thought through fully, and open forums like this morning are very important in deciding how to proceed and also advised me to write to you, and to Mr Howarth, hence the email
I do hope you will decide to help
Yours sincerely
Previous Article
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Anthony Endsor
15:23 PM, 20th July 2015, About 9 years ago
As a Conservative voter at the last election, I feel truly betrayed by the government.
Part of me says we should have seen it coming. After all this is the party who have introduced many measures to help people into their own homes and haven't really thought much about helping landlords in the past.
I'll add my voice to it and write to George Osborne too, though I believe this actually WAS thought through, as it's unlikely the government will care about the implications described, but we'll have to see what response we get I suppose.
Alex Williams
17:48 PM, 20th July 2015, About 9 years ago
Of all the hair brained half assed badly thought through government proposals in history the idea to dispense with the notion that " Profit = Income - Expenses " has to be right up there !
Michael Fickling
20:31 PM, 20th July 2015, About 9 years ago
I have written to my local Conservative Mp in the same vein as others.I think the key is to FIRSTLY..have this apply only to new purchases..note new purchases..not new mortgages.
And secondly to focus on the fact that rent on houses will never compare to other business incomes..its much lower......comparing cash in to true profit out......therefore landlords have always needed to be highly geared and without that gearing and the tax allowance as is ...it simply does not stack up as an investment..
Anon
21:34 PM, 20th July 2015, About 9 years ago
This measure if punishing those people who declare their incomes and pay 40% or 45% tax.
"After all this is the party who have introduced many measures to help people into their own homes "
Yes, but he is supporting those who want to own their homes in favour of tenants who unlikely to ever own their homes. George Osborne has frozen housing benefit for a further 4 years. Some of are 'in this together' with our tenants.
George Osborne should have given a dignified exit to those who want to sell up, by getting rid of Capital Gains Tax.
steve sanders
22:49 PM, 20th July 2015, About 9 years ago
I hope that I am proved wrong but I think you are all barking up the wrong tree and your letters will get no where.
The fact is, no one (ie average voters), don't give a stuff about the plight of Landlords. (just scroll down and read the comments section on any online newspaper with an article on buy-to-let).
We are writing these letters under the delusion that the Conservatives are for business. But if you look at their history, they hav ebeen for big business.
Early 1980's loads of small manufacturing companies went to the wall. Does anyone recall any public concern for the business owners who went to the wall?
In the early 1990's interest rates doubled and many businesses went to the wall. Does anyone recall any mass public outpouring of grief for the business owner who had to close his business, sell his Surrey mansion and Bentley?
Osborne doesn't give a stuff about us. He knows that voters don't give a stuff about us too.
If you think it through from his point of view:
- Most landlords have less than 3 properties. These guys don't have enough scale to incorporate and will most likely sell up. This will give George plenty of CGT rvenue.
- There are relatively few mega-landlords (ie lets define these as those whose mortgage interest bill is £150k pa). These guys will be in the top rate 45% tax bracket and will find it cost effective to pay for tax advice and restructure their portfolio
- The 'middle' landords won't be able to sell (because they can't afford the CGT) and don't have enough to make the costs of restructing worth while. George will milk these guys with this new turnover tax.
Mark Alexander - Founder of Property118
23:28 PM, 20th July 2015, About 9 years ago
Reply to the comment left by "steve sanders" at "20/07/2015 - 22:49":
You might be right, I'm sure he would rather have 1,000 well funded corporate landlords that he could regulate than two million people he cannot control.
However, two million voting landlords and their five million tenants is a huge chunk of the population for one man to dictate to in terms of livlihoods and their homes.
Corporate landlords will be even tougher on tenants than housing associations and mortgage lenders in my opinion. They will cherry pick the best tenants and the housing crisis and homelessness crisis will intensify, especially for those for whom home ownership is not a conceivable option due to finances or work mobility.
.
steve sanders
0:46 AM, 21st July 2015, About 9 years ago
Reply to the comment left by "Mark Alexander" at "20/07/2015 - 23:28":
Mark, I hate this as much as you do. It totally desimates my business model. I fully agree with your assessment on what it will do to the housing market. However, I am not convinced that Tenants will blame the Government for rising rents and th ehousing shortage. They will blame the 'greedy landlords'.
I know as landlords, we all have a vote. But as home ownership continues to its journey from the preserve of the majority to that of the minority, expect more anti-landlord legislation.
Sam C
11:02 AM, 21st July 2015, About 9 years ago
A big fuss is needed in London. There are a lot of tenants in London with rents already being very high in most places. Any upward pressure on rents in the city would be more pressure than the government would like.
Admittedly, there are a lot of cash buyers in London, and also many empty properties that have been bought by foreign investors. I still think that the plea of so many people living in close proximity to each other will be hard to ignore by any government..
Anon
12:26 PM, 21st July 2015, About 9 years ago
“steve sanders” wrote "The fact is, no one (ie average voters), don’t give a stuff about the plight of Landlords. (just scroll down and read the comments section on any online newspaper with an article on buy-to-let)."
Steve, I would urge you to read such comments with a pinch of salt. They are mostly campaigners, who want to buy their own home. Landlords have become the scape goat for house prices (Even though in the 70s and 80s we had a house price boom and BTL were non-existent). However, there are a of voiceless tenants such as single mums, who would still be in B&B, if it were not for private landlords. The well off tenants who campaign for landlord taxes, don't care if benefit tenants are put back in B&B, so long as house prices go down. If they push landlords out, then who provides the single room?
Landlords are also attacked because our rents are higher then council rents, even councils built their houses at 1960s house prices. We have the burden of tax on rent.
Stewart
12:29 PM, 23rd July 2015, About 9 years ago
If anyone needs the name, address and email address of their local Tory there is a filterable list of MPs at the house of Commons website. I filtered by Conservative Party and the link is here –
http://www.parliament.uk/mps-lords-and-offices/mps/?sort=3&type=4
This may help you contact your local MP