New landlord tax rules for new debt only

New landlord tax rules for new debt only

10:54 AM, 23rd July 2015, About 7 years ago 52

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Those of us who are lobbying for an amendment to the budget need to have a very clear message.

I propose that message is “new tax rules for new debt only”

Let us be absolutely clear; Government and the Bank of England have recognised a need to reduce growth in the buy-to-let market. It is highly unlikely they would knowingly risk the decimation of an industry and all of the knock on consequences. At the moment they are swinging a sledge hammer at a nut. The consequences of the sledge hammer striking that nut is obliteration which serves no purpose. This needs to be made clear.

To help you to comprehend the consequences of the Budget proposals being implemented as proposed you need to have a clear understanding of the impact on your personal finances.

Will your tax be more than your profit?

Before the Summer 2015 Budget it was unthinkable that a UK Government could charge anybody more tax than they are making in profit. However, that is entirely possible under the Budget proposals. Indeed, in the case issued by HMRC as an example, the extra tax payable by that landlord will be equal to all of his rental profit, plus 50%. Tax Levy on Landlords

But how will the Summer Budget affect your personal finances? If the total of your gross income and your BTL finance costs is more than £43,000 then you will pay more tax.  Perhaps more to the point, what are you going to do about it?

A think tank of numerically talented Property118 members has pored over a spreadsheet created by Alex Caravello of Milton Keynes Landlords Association and given the numbers the thumbs up. The spreadsheet allows you to calculate the REAL effects of the Tax Levy for your own circumstances. Let’s be clear, this is a tax levy despite the Government spin doctors calling it an amendment to “tax relief”. Some have gone as far as to call it a ‘confiscation of assets proposal’

To download the spreadsheet, in order to see for yourself how you will be personally affected, please CLICK HERE.

We urge you to then to make an appointment with your local MP to show him/her your calculations. If you are not confident with spreadsheets or your tax returns please ask your accountant to complete it for you. If you have other professional advisers such as a mortgage broker, a solicitor or a letting agent then show the results to them too. Perhaps even show your tenants and explain that all landlords are in a similar position and will need to increase rents to pay these tax levies if they are implemented. The more people we can disturb the better.

If we are to stand any chance of getting these Budget proposals amended there needs to be a massive public outcry.

If you are a talented letter writer please consider further lobbying, e.g. to the Bank of England (head office and local representatives), George Osborne and even the Prime Minister. Some great examples of letters already sent can be found HERE.

It will not only be landlords who are affected if these proposals proceed as planned. If landlords face bankruptcy and there is a fire sale of tenanted property resulting in property prices crashing more homeowners could be trapped in negative equity, particularly those first time buyers who have managed to get onto the housing ladder in recent years. The tenants of the sold or repossessed properties would be evicted, and rents for the remaining properties would rise. I doubt any sane Government would want that.

Economics and common sense will prevail …. eventually …. but it is imperative that every reader of this article takes action now and completes the suggested tasks above if we are to stand any chance of common sense prevailing before it is too late.

The key message we must get across to the influencers of this decision (Government and the Bank of England) is as follows ….


Please share this article via Social Media and encourage all landlords you know to read it and to download the spreadsheet.

Just in case you haven’t done so already, please CLICK HERE to download the spreadsheet and then re-read this article to remind yourself of what to do next.


by Appalled Landlord

14:55 PM, 24th July 2015, About 7 years ago

Reply to the comment left by "Paul Goulder" at "24/07/2015 - 13:36":

Hi Paul

I see you mean the line on the spreadsheet, sorry. I thought you meant something I had written.

This loss of personal allowance affects individuals whose total income exceeds £100,000. From that point upwards they start to lose their personal allowance at the rate of £1 for every £2 of income. At £121,200 they lose it altogether.

They start to pay tax at 45% on income over £150,000.

You can see this happening if you put zero in the red boxes for rental income and for interest, and just put the above figures in the red salary box.

by Paul Goulder

15:18 PM, 24th July 2015, About 7 years ago

Hi. appalled landlord
It should have said. , loss of personnel allowance ,
Which is on the software sorry but like everyone I can't work the figures out Paul

by Paul Goulder

15:31 PM, 24th July 2015, About 7 years ago

Hi appalled landlord
Yes it all makes sense now thank you very much,and thank you the software king Alex caravello

by Anne Nixon

22:46 PM, 24th July 2015, About 7 years ago

I had a meeting with my (Con) MP today and I made exactly this point - that the measures should be applied only to new purchases.

The more of us who can get a face to face meeting with our MPs to put forward our points the better I think.

It is is simple matter to book a 10 min slot at your local constituency surgery (although the summer recess is approaching now which may cause a delay?) and I'm sure such a meeting will probably have more impact than an email alone.

by Dr Rosalind Beck

22:57 PM, 24th July 2015, About 7 years ago

Reply to the comment left by "Anne Nixon" at "24/07/2015 - 22:46":

Well done Anne. Did you get any idea of what your MP thought of it and what, if anything, they would do about it? I've mentioned on the other thread that my Labour MP is really up for helping by asking questions of the Treasury.
I agree that a visit to the MP is a great idea. I might try and get mine to come around for a cuppa! (he's been so damn supportive)

by Anne Nixon

23:14 PM, 24th July 2015, About 7 years ago

Hi Ros,

He did say he would pass on my representations to the chancellor, I'm not sure how enthusiastic he was, but in fairness he listened carefully and said I put my points across well.
He said the money to balance the budget had to come from somewhere, a point I agreed with and said landlords are absolutely happy to pay taxes which are the same as those levied on any other kind of business.
I stressed the point of how full on a property rental business is and how unlike a traditional financial investment of the 'set up and leave' type, pointing out that I work literally 7 days a week in my business whilst fitting it around working 3 days a week in a 'proper' job.

by Dr Rosalind Beck

0:03 AM, 25th July 2015, About 7 years ago

Great Anne. That's the kind of message we have to get across.
He's a bit silly though regarding balancing the budget as this policy is going to throw the housing sector and subsequently the economy into chaos. No-one, as far as I know, has tried to give a detailed, scientific (or at least semi-scientific) projection of the consequences for all kinds of people, including millions of tenants.
It's also amazing isn't it, that a Conservative MP should be reserved in his enthusiasm for supporting business people, while my Labour MP is far more supportive? When the director of spareroom wrote to me today he said that he interviewed MPs from 5 parties prior to the election and all the parties except for the Conservative party had policies aimed at controlling, regulating etc. landlords. Honestly, the Conservatives have been completely underhand about this - at least, at the top. It was probably a closely-guarded secret, and now many/most of the less powerful Conservative MPs are toeing the party line. Politics is a dirty business, I think, filled with cowards who won't speak their mind.

by gaurav mehta

9:18 AM, 25th July 2015, About 7 years ago

hi i know we all are making a petition to prevent ,or to minimise the change this will bring.
has anyone creative been able to figure out a way around this using limited company or any other route and how would this be possible if someone can share their thoughts if possible with an example .
The only reason i am saying that is so we can be prepared in one way or the other .

by Lynne Davis

13:45 PM, 25th July 2015, About 7 years ago

This is frightening.

Small nit-pick on the spreadsheet: where it says "percentage change" it should read "new value as a percentage of old value" or equivalent. It appears to have been calculated as new/old x 100.

Percentage change is calculated as (new - old)/old x 100. A percentage change of 0 means no change; a percentage change of 100% means that the amount doubles.

Looking at Example 2, if previously you were being taxed at 20% and now it's 122% then the new rate is 610% of the old (122 / 20 = 6.1; this is what the spreadsheet shows, albeit to a greater degree of accuracy), but the percentage change is 510% ((120-20)/20 = 5.1, or the original 20% plus just over five times as much again), not 610%.

If we want to have a credible argument then we should really get our maths right!

by Abdul Choudhury

17:31 PM, 25th July 2015, About 7 years ago

A consequence of the proposed changes to BTL investors like me is that my child maintenance contribution to my ex will almost double from around £6800 per year to £13500 per year because my income would artificially increase as a result of the interest being added to my rental income from 2020. I have calculated that my effective rate of tax would be 65% in 2020.

I am sure many people are in a similar position to me.

A Choudhury

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