New landlord tax rules for new debt only

by Mark Alexander

10:54 AM, 23rd July 2015
About 4 years ago

New landlord tax rules for new debt only

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New landlord tax rules for new debt only

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 ….

“NEW TAX RULES FOR NEW DEBT ONLY”

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.



Comments

Dr Rosalind Beck

0:15 AM, 27th July 2015
About 4 years ago

Reply to the comment left by "Lynne Davis" at "26/07/2015 - 22:17":

Great letter Lynne. I think the personal examples are the most effective. For me though, the real problem is when interest rates rise. I have written in the other thread about my own example. I currently have a net income of £50,000. If interest rates rose 3%, I would be paying an extra £45,000 in interest payments. This would mean my actual income was £5,000, but for tax purposes it would be £95,000! That's the scenario worrying me. And for some people who currently pay higher rates than I do, this will be the immediate reality. It's horrendous. I think someone should do an artwork on it. It would just be a big page with words on it like: discriminatory, outrageous, unfair, illogical, disastrous, catastrophic, unbelievable, incredible, 'it can't be true!' nonsensical, ludicrous, ridiculous. Okay, I sound like a thesaurus now. Ah, CRIMINAL. That's one of my favourites, as stealing IS criminal. and this is an attempt to steal gradually/quickly (depending on individual circumstances) everything we have built up over years.

Lynne Davis

19:16 PM, 27th July 2015
About 4 years ago

Thanks both.

Appalled Landlord, I know £18K wouldn't have a big effect, but it would be sufficient to push the "income" into the higher tax bracket and that's when the detrimental effects begin. The non-rental income would have to be just below the higher tax bracket to start with for the worst effects to be felt, but even an income of £18K is going to be enough to make a difference.

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