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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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Barry Fitzpatrick
12:36 PM, 23rd July 2015, About 9 years ago
Little has been said about properties held in a limited company, other than with regards to transferring privately held properties into such a structure, and the transfer costs to do so.
A point has been missed is that prior to the proposed tax changes privately held properties where the actual profit exceeds £43,000 are already being taxed more heavily than if the same portfolio was held in a limited company which would be taxed at 20% (and going down to 18% by 2020). The proposed tax changes makes the difference even larger.
Rob Crawford
12:00 PM, 26th July 2015, About 9 years ago
FAO Steve: New MP's, older MP's and particularly the MP's of opposition parties will all want to make their mark in Government. If thousands of letters were received by them from a significant voting landlord group they would 'not' be ignored. Unfortunately to many rely on the efforts of others. It takes no time to write a letter and post it. To sit back and do nothing is not an option, please don't put a downer on those who try! I have written my letter and will be meeting my MP in two weeks time!
Laura Delow
12:33 PM, 26th July 2015, About 9 years ago
Added to the burden of an increase in taxation is the impact this will likely have on rental calculations lenders use which could mean many landlords become mortgage prisoners and/or landlords will be unable to raise the necessary finance to buy more property. At present lenders commonly use a 125% of 5% rental cover (some 5.5% or higher & very very few use 125% of the pay rate). This 125% margin is used to cover voids, costs/expenses, service charges & the 5% notional rate is used to allow for an increase in interest rates (which will no doubt increase as interest rates slowly rise). To accommodate the loss of higher rate tax relief, we could see lenders margins increase to approx 130% or higher.
Gareth Wilson
17:31 PM, 19th November 2015, About 9 years ago
I have to agree with Steve to an extent. The destructiveness of the tax-change is too obvious in my opinion to be the result of a mere oversight or lack of understanding. I believe that the consequences of which we are warning are in fact the main rationale of clause 24.
The policy has probably been preceded by a calculation: that the actual collateral damage of ruined landlords, rents increased and tenants evicted is outweighed by the enhanced popularity and votes to be had from being seen to be destroying landlords and jumping on the rapidly-growing anti-landlord bandwagon. This has probably been compounded by a secondary calculation of the parliamentary spin machine beating our own in the battle to assign blame for the mess this chancellor is going to cause, and the potential for landlords (mortgaged ones of course) to be "punished" yet further as a result of that further outcome.
Factor in as well that those most likely to be represented or connected to our "honourable" members of parliament and actually fuelling the London housing bubble - corporate landlords and cash-buyers - are suspiciously exempt from the onslaught, and the deliberate motivation of the measures seems even more obvious.
The politicians that we trusted to responsibly manage the housing/rental market and voted for, along with various of their cronies, are using the tax system to steal what we have, what we have worked and saved for. Their intention is to drive us out of business, harvesting our properties for their own financial gain and the votes of the rapidly growing, and extremely misinformed anti-landlord brigade for their own political gain. A stitch-up, a hatchet-job, a feeding frenzy: they're out to get us because contrary to our previous tempering of the rhetoric, it turns out that our most influential politicians really are the lying, corrupt, morally-bankrupt, opportunistic, self-aggrandising scumbags many people said they had been all along.
But this is why we have to fight!
Now we know the score: that what we have been taught is the right way - filling in our personal tax returns, bending over and asking HMRC to be gentle - is the way to eventual ruin. We must still keep the petition-counter going, share it and the articles of property websites like this with as many people as possible, keep the e-mails bouncing back-and-forth, drive our MPs mad, never stop arguing, make them psychologically implode, sit down and plan with the best property accountants we affordable, lock down our tax liability as best we can, hand any tenants we evict as a result of this measure printouts of our e-mail correspondence with our dismissive MPs, do the same when announcing the resulting rent increases, sling your canvassing local (probably Tory) MP off of your property come next election time and call them an "'effin' backstabber", fight them on the beaches, fight them on the landing grounds, fight them in the fields and in the streets, fight in the hills and never surrender.
This is a vindictive and evil piece of legislation, devised to damage our country for the enrichment of an opportunistic few. The day it succeeds in obtaining what it was designed to from myself will be the day money is prised from my cold dead fingers.
I have been drinking coffee.
Mark Shine
21:03 PM, 19th November 2015, About 9 years ago
Yes Gareth, good post.
The anti-BTL brigade are naturally thrilled to bits, genuinely falling for GO's spin. What they fail to realise despite it being spelt out for them on many occasions is that the vast majority of BTLers will not be affected by C24 as they include the unencumbered & incorporated. In fact they are more likely to see C24 positively due to upward pressure on rents, buying or building PRS opportunities for them.
In fact I wouldn't be surprised if C24 was actually the idea of corporates wanting a sizeable chunk of the PRS with GO merely being their yes man.
NPR levy for ALL residential landlords could have achieved infinitely more revenue for HMRC. But unsurprisingly DG (or his parties corporate sponsors) not interested in that.
Gareth Wilson
22:47 PM, 19th November 2015, About 9 years ago
I know, it's insane. The exceptionalism of government and public attitudes towards landlords, doesn't just concern the calculation of profit, it concerns basic economics as well.
Throughout the private sector competition is considered positive. But no, not the rental market, apparently this particular market is going to be enhanced by the eradication of its majority of small-medium scale providers. Yeah right! Things would get better like they would in the energy sector, were the Chancellor to tax all of the new small suppliers out of existence and leave the market to the Big Six! Fortunately though there is no populist bandwagon in support of that!
I mostly let to young people moving from other parts of the UK to start new jobs after university, and Polish and Eastern European immigrants seeking to work in the UK on a temporary basis. The lives of these people are in a state of transition, and at this point in time they do not wish to purchase a home of their own. They represent an almost constant demand for rental property, and we are the supply that they NEED. If we are forced out of the market because of Osborne's Tax on Mortgage Interest, where will these people go - these people who have done nothing wrong, whose viewings of my properties can rise to double-digit figures, and who have even offered to clean my whole house to get ahead of other potential viewers and secure the property (I don't take advantage of such offers btw).
Gareth Wilson
22:49 PM, 19th November 2015, About 9 years ago
Reply to the comment left by "Gareth Wilson" at "19/11/2015 - 22:47":
And who will step in to the void... faceless corporate landlords, facing reduced competition, who will set higher rents in the long-term, put up barriers to communication, and tie the tenants in knots with T & Cs and fees.
Mark Shine
23:49 PM, 19th November 2015, About 9 years ago
Reply to the comment left by "Gareth Wilson" at "19/11/2015 - 22:49":
Those faceless corporates you mention have GO's ear though. Small/medium private (some very PROFESSIONAL) resi property businesses sadly do not.
As said before the PRS desperately needs a subscription based (to cover admin costs) yet not for profit / unbiased representative body to... represent the sector, landlords & tenants, encumbered or not, incorporated or not... capable of lobbying against govt BS rhetoric effectively.
Ps i let / manage myself. I have never charged any fees to tenants. I don't agree with it. LLs should pay any fees as morally incorrect to charge buyer & seller
Gareth Wilson
0:03 AM, 20th November 2015, About 9 years ago
Reply to the comment left by "Mark Shine" at "19/11/2015 - 23:49":
Hi Mark,
You run your rental business just like me. No fees and no agents. Just a quick response to maintenance issues, a monthly rent, and a deposit.
Between drinking mulled wine from goblets by the fire, and planning dastardly, spiteful landlordy deeds in our castle on the hill, myself and my mother even do the cleaning between tenancies.
John Mcgowan
18:04 PM, 11th March 2016, About 8 years ago
George Osborne has made a series of aggressive, unfair unworkable financial attacks on landlords since July 2015, particularly clause 24 and the substantial increase in stamp duty for people who buy more than one property. This chancellor has singled out smaller landlords for financial annihilation whilst protecting his pals who run large corp-orates from clause 24 and other rich pals who are protected from extra stamp duty payments if they buy 15 or more properties at a time. History shows that the chancellor of Germany in 1939 did a similar thing to destroy businesses of certain groups of people and handed them on to his pals also, before taking things much further right the way to hell itself. Whilst George has a degree in History he hasn't learned from it and seems happy to discriminate against individual groups of hard working decent landlords with successful businesses who provide an important service to the community in order to enable his rich pals to cleanup.History often partially repeats itself. Clause 24 needs to be ripped up now and he needs to take advice from persons highly qualified in economics rather than an idiot with a Geography degree ie Mr David Kinsman whose useless, biased and completely inaccurate project was used as a basis for clause 24. Lets hope that the legal eagles who look at clause 24 agree with us!