Keeping the momentum going against Section 24

Keeping the momentum going against Section 24

9:29 AM, 13th December 2016, About 6 years ago 61

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I have decided to adopt a policy of making myself a complete pain in the backside and try to create as much noise around this subject as possible. Not sure it will work but it’s better than sitting around waiting for the inevitable.momentum

I have written to my local MP Caroline Dineage and have received the following response. I was wondering if anybody, who knows more about the subject than I do, could help me to fashion my next response to what I consider to be a bog standard misinformed piece of nonsense. I would like to go back with as much fact as possible to argue against each of her points. I can do the research and thinking on my own but 10,000 heads are better than one and wondered if anybody had any ideas or information that dispels the figures/information she is quoting?

I have also written to each member of the select committee on housing which met last week and will be responding to what I strongly suspect will be a very similar email reply from each of them:

“Thank you for your e-mail. I am very sorry for my error in sending a response to you regarding letting agent fees rather than mortgage interest relief. I have been receiving a great deal of correspondence on these two issues and inadvertently confused your e-mail with another.

As a former business-owner myself, I am passionate about helping small businesses thrive and fully appreciate your concerns about this policy proposal for the viability of your business.

The reason for these reforms is that the Government feels that the interests of the professional rented sector need to be balanced against the wider interests of the economy, including home ownership rates, a fairer tax system and mitigating against any future risks.

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’. I think it is important to note that maintenance and repairs, along with agents’ fees, legal fees, insurance, utilities, and service charges, are all still ‘allowable expenses’ and thus still tax deductible.

I appreciate you feel this could cause many private rental businesses to fold, but I would stress that less than 1 in 5 individual landlords are expected to pay more tax as a result of the restriction to Mortgage Tax Relief. Furthermore, I would assure you that this change is being introduced gradually from April 2017 over 4 years, giving landlords time to plan for and adjust to these changes.

While I appreciate you might find this response disappointing, I hope it goes some way to explaining the Government rationale on this issue.

Thank you once again for taking the time to write to me on this important issue.

Kind regards

Any guidance, info, statistics, quotes, etc. to make it harder to argue against us would be very much appreciated.




Mark Shine

10:41 AM, 14th December 2016, About 6 years ago

Apologies if I missed it, but in the emails that you are sending to MPs, are you also including the fact that the unintended (or intended?) consequences of S24 may heavily encourage the wealthiest LLs to massively expand their PRS businesses?

The main beneficiaries of S24 will surely be:
1.‘Private’ LLs buying for cash
but mainly:
2.Any ‘incorporated’ LLs whose current focus is to grow their PRS businesses. Particularly those who do not need to take dividends above the tax free allowance.

As long as leveraged corporate LLs pay less than £2m interest on their loans per annum, some might actually decide increase their borrowing as all fully deductible?

Jennifer Aniston

11:18 AM, 14th December 2016, About 6 years ago

Hi Mark

Thanks for this, I'm at the stage now where I'm talking to my own MP about my personal situation, however, I will be sending a separate email about the overall situation and will include your points. Although I have to admit I had to read your points about ten times before I could actually work out what you were talking about! And I'm still not sure if you're saying Section 24 is a good or a bad thing! No disrespect to you in any way, more that my brain seems to have found its limit with regards to the various financial implications that need to be communicated in any one email!



Gary Dully

12:21 PM, 14th December 2016, About 6 years ago

Obviously trying to fight these changes isn't easy, so lets put a few figures in front of this MP, via Rightmove.

The average house price available for purchase for a homeowner or landlord in your constituency, (Gosport, Hampshire), is £180,000.

On the 1st of January, 2017 new criteria will come into force in regards to "Stress Testing" for the banks and BTL Loans.

This will be forcing "MINIMUM" Rental values required before a standard 75% Loan To Value mortgage can be obtained, for either party, or £135,000 against that value of £180,000. (75% LTV)

From the 1st January, 2017 a new landlord will have to charge a Minimum Rent of £770 per Month on an average property in that constituency, before a property can be purchased, especially by a new landlord with limited funds available as a deposit.

The LHA or Universal Credit rate for that area is
£299 for a shared house rate
£505 for a 1 bedroom entitlement
£625pcm for a 2 bedroom entitlement
£747pcm for a 3 bed entitlement
£1050 for a 4 bed entitlement.

That now means that ALL BENEFIT TENANTS IN GOSPORT, HAMPSHIRE FAIL THAT CRITERIA, unless they qualify for a 4 bed + house.

How many 4 Bed Houses in your constituency cost less than £180,000?

That leaves your social housing tenants the option of a Houseshare (HMO), with a minimum share rate of 3 Households per property.
Or a massive shortage of rental properties without a massive increase in rents.

A landlord charging £900 in rent can get a loan worth up to £172,800 under the current tests.
But this will fall to £157,091 under the new tests next year – a reduction of £15,709
HMO mortgages are commercial financial products and are a lot more expensive to use.

Now lets move on to your pathetic argument concerning the tax changes and comparing my tax position with an Ordinary Homeowner.

Firstly, I have 22 BTL properties that I rent out.

So First Question.
Am I a Business, a Homeowner or am I an Investor?

Well, probably, I am all of them.

So I pay the same taxes as a Homeowner (Income Tax)
I pay taxes as a Business Owner (Income Tax or Corporation Tax)
I pay Taxes as an Investor (Capital Gains Tax)

But I also pay Landlord Taxes (Licence Fees)
HMO (Council Tax).
Unoccupied Property Tax @ 150% of an Ordinary HomeOwner
I also pay Class 2 NI and Class 4 NI against my property Income
I also pay letting agents fees
I also pay for repairs
I also pay for the Governments Immigration Checks
I also pay for an Accountant
I also pay Legal Cost to Evict
I also pay for vandalism on a regular basis

Now the Social Aspects
How many drug addicts and ex prisoners does an Ordinary Homeowner accommodate?

How many households does an Ordinary Householder keep in housing?
I anticipate that your answer is a maximum of One.

I house a total of 53 households
3 of which are ex-offenders and I suspect 2 are habitual drug users and the majority are the JAMS category and you compare me with an Ordinary Householder.

I suggest you get out more and see whats happening, better still why not become a landlord yourself and take on a couple of single parents with toddlers, then do a comparison.

Now the tax position that's about to unfold.

George Osborne decided to ignore the Corporate Landlords and inflict Section 24 on BTL landlords. To make their position equal to "Ordinary Home Owners".

There was a reason he was sacked - do you know why that was? - its because he was surrounded by corporate lobbies and listened to their business models and needed 4 budgets a year to keep the feature writers in employment.

So now you have corporate landlords entering the field, but they cant compete with BTL can they? - so you have to level BTL with their playing field instead.

The only way is to force rents up on the BTL side of the market.

So now brace yourself for whats coming.
Lets compare the rent rises across 2 groups of Landlords
BTL and Corporate, Holiday Lets and Housing Associations.

Your average house of £180,000
It requires a stress test interest rate of 5.5% from January = £7425 or £619 pcm finance costs. Tax that @ 40%

BTL landlord will have additional tax of 40% on his finance costs, less a 20% allowance.
He will have his Personal Tax Allowance Removed £ for £, (100% Tax rate).
So if he has an £11,000 interest cost - he loses the whole of his Tax Free Allowance.

Based on the Average House in this area he or she will require 1.48 average BTL mortgages to have their Personal Tax Free Allowances wiped out, BEFORE any profit is taxed.

Furthermore it only requires 4.3 average BTL properties to place them in a higher tax bracket, if they have no other form of income.

If they also have a job on the MINIMUM LIVING WAGE and make no rental property profits - they will automatically be dragged into a Higher Rate Tax Bracket after 2.2 Average BTL mortgages in that area.

But the corporate, holiday let or housing association landlords are not affected, in fact the company landlords will see their taxes go down.

So you are going to drag the majority of BTL landlords into a Higher rate tax bracket by default, even if they only earn the Minimum Living Wage.

They will have little option than to
1. Raise Rents
2. Go Bust
3. Sell Up.

Most cant incorporate because of Capital Gains Tax, Stamp Duty and Finance Charges and many may be in negative equity and cant sell.

When interest rates increase so will the finance charge, followed by the tax bill, followed by the rents, followed by the evictions, followed by the mass migration of landlords (1 Million +) from the market, leaving behind the cash rich ones and corporate.

A property once incorporated is highly unlikely to ever come back to the market, it will become inherited or sold to another company.

How many companies do you know that take on ex-offenders and social problem tenants, let alone those on in work benefits?

Do you have them ready for the BTL meltdown?
Do you have a few thousand of corporate rental properties available tomorrow in your constituency?

Oh you have?

Well sorry to have bothered you then,

A bit of a fuss about nothing, silly me!


Jennifer Aniston

13:02 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Gary Dully" at "14/12/2016 - 12:21":

Hi Gary

That's a sterling piece of work and quite obviously going straight to Caroline Dineage word for word! Thanks so much. Although I have to be honest it made me scared and angry in equal measure. It's just so brutal and frustrating.

My own accountant is going to look at my spreadsheet over the weekend and give me a personal summary of the implications for me but, quite frankly, she wasn't exactly reassuring me that it's all going to work out in the end. In fact, quite the opposite. But that'll also go straight over to Dineage.

I've now discovered Twitter and have been sending my campaign to everyone under the sun, all constituency MP's, the labour party, the SNP, the Queen, the Pope, all of the big media people, the political and business journalists, etc. etc. I know the chances of getting it picked up by anyone are slim but you never know.

Now got 51 people to sign it and some of the comments they are leaving are worrying and so sad.

Will let you know how I get on.


Rachel Hodge

13:32 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Pamela Potter" at "14/12/2016 - 13:02":

Excellent partition Pam, now signed.

Mark - do you think Axe the Tenant Tax could post this partition on their FB page?

Jennifer Aniston

13:36 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Rachel Hodge" at "14/12/2016 - 13:32":

Thanks Rachel

Pass it on to all of your tenants and ask them to include a comment about how this is effecting them. I'm tweeting all of the comments directly to Philip Hammond's Twitter account.


Rachel Hodge

13:42 PM, 14th December 2016, About 6 years ago

oops. "partition"! I'm a surveyor, forgive me 🙂

Mark Shine

13:48 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Pamela Potter" at "14/12/2016 - 11:18":

Hi Pam, in response to your ‘And I’m still not sure if you’re saying Section 24 is a good or a bad thing!
I suppose it depends who’s answering.
For LLs with a ‘traditional’ BTL mortgage(s) including myself or the majority of tenants it’s a bad thing.
For LLs with a LTD company BTL mortgage(s), larger corporate LLs, individual LLs with unencumbered properties - some of them might see it as a very good thing.

Gary Dully

16:42 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Mark Shine" at "14/12/2016 - 13:48":

And the tenants of either distinction are going to pay for it whatever happens.

New landlords will incorporate and become limited companies and utilise the lift in rents to gain an advantage of either profit or will have the flexibility to discount.

1 Million + Landlords who are BTL investors will be savaged by
1. Loss of Personal Allowances
2. Tax Due on Losses
3. An inability to compete due to an unfair tax advantage.

Imagine if Osborne had said a turnover of finance will be taxed on all shops, except Tesco, Sainsburys, Lidle or any other limited company?

All petrol stations will be taxed on turnover of finance, except the larger ones?

And it was to put them in line with "Ordinary Homeowners"

Would you believe him?

Replies on a postcard please to
George Osborne Limited,
Idonthaveaclue Cottages
Brainleftina Field

Chris @ Possession Friend

20:33 PM, 14th December 2016, About 6 years ago

Reply to the comment left by "Pamela Potter" at "14/12/2016 - 13:02":

How do you send that Change.Org petition to your Tenants email address ?
I can only see a Facebook link and guess what - I don't have my tenants on my Facebook account, only friends ( tenants are customers )

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