Section 24: What has it forced you to do?

by Gareth Wilson

21:20 PM, 4th November 2016
About 2 years ago

Section 24: What has it forced you to do?

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Section 24: What has it forced you to do?

I have created a thread for Property118 landlords to explain the decisions and changes they have made thus far as a direct consequence of Section 24 of The Finance (No. 2) Act 2015 which changes the rules on mortgage interest relief for private landlords from April 2017 onward. Section 24 - Landlords Views

The intention is that posts made here can serve as a duplicable source of accounts for landlords to draw upon when in dialogue with members of the Conservative Party, the Treasury, Shelter, local councils, or any other party to whom Section 24 is of relevance.

Of particular interest are the effects upon tenants generally and decisions taken with respect to tenants in receipt of housing benefit, along with the attitude of Property118 landlords towards the Conservative Party and their propensity to vote for it.

It would be particularly useful if Property118 landlords posting their accounts upon this thread could also copy and paste them into the comments section of the following post on the Axe the Tenant Tax Facebook page….

https://www.facebook.com/clause24/posts/1287685751274426

Here are a number of accounts left by landlords on Facebook for your perusal and reference:

John Saunders: “I have a tenant that has already moved on last month when I said the rent held for last two yrs will now start to go up. I have other long term tenants. ( 8 yrs plus) that will get the same news. There rent is calculated as full market. Minus 10 agent fees as I rent direct. Then minus £30 per month for being a good tenant. Not sure I can continue this discount as the tax per property will increase approx £2000 per year..They will loose out and so will I. As I can’t put rents up 20%. time to sell coming soon maybe. So that be my pension gone.”

Martin Pitick: “The tax was unannounced in their manifesto. Instead, we all attacked Miliband’s rent control pledge. My tenants pay the market rate on entry but receive no further increases (some for many years). They will all now receive massive rises in an attempt to offset the tax hike. The scary thing is that many landlords with a mix of employment and a couple of mortgaged BTLs will fall into higher rate tax which will leave them barely covering their own costs. By the time they find out what a toxic lump their mortgages are on their accounts everyone will be trying to sell and their will be a wealth transfer to the non-leveraged BTL players who will be only too happy to step in. It’s a very vindictive tax which has no effect on corporates or the rich BTL players. Given the difficulty I face and the plan I have to follow with my small portfolio I cant see how anyone with more than a handful of properties isn’t going to go to the wall and loose their pensions. You can’t just dispose overnight. The Conservatives will feel that in the marginals across the country from landlords and their tenants who will know why rents are increasing or their landlord is disposing.”

Colin Wright: “The majority of my tenants claim housing benefit. Some have been living in my houses for 10 years + and all are long standing with no top-ups asked for. I charge rent based on LHA. Rents are therefore well below market value. Several months ago I wrote to all tenants advising that rent increases are necessary and some houses will be sold. One family (who were in my house for 4 years) have already moved out and gone to live with family as they could not afford any increase at all. Another has asked for Notice hoping to be rehoused with council (good luck with that!). Some so far have agreed to a 15% rent increase which still falls below market rent value. Others have just phoned me in a panic. The vacated houses will be sold but with the capital gains tax at 28% are not going to clear mortgages of other houses. So in conclusion, people and being made homeless, others who already live on a shoe string budget are having to suffer higher rents and my pension plan is in jeopardy!
My thoughts on the Conservative party? I would rather not put into words!”

Lee Gough: “I have left the country. Increased rents and selling when vacant. Also would never vote Tory again.”

Chris Walters: “I own 39 properties full time management / repairs / Lettings etc by self and wife for last 14 years.
Owned first property 38 years!
Never increased rent to an existing tenant EVER!
Roughy 50% on some form of benefit due to limited employment contracts etc.
Longest serving tenant 9 years.
Some of my tenants are tradespeople who I provide some work for e.g. gardening / decorating / roofing.
My plan is to downsize at fastest rate possible to take into account Capital Gains Tax etc.
Always voted Conservative but will NEVER vote for them again.
Tenants told of the situation we are all facing and can’t believe what an ill thought out idea it is.
In total I provide housing for approx 70 people.
God help us all if this ridiculous Tax isn’t stopped.”

Andrew McDonagh: “Will increase rents, and have put on hold any more purchases.”

Amanda Walker-Fernley: “As tenants have handed their notice in we have converted to serviced accommodation and we’re making overpayments to reduce mortgages. Further down the line we will have to increase rents on the remainder which aren’t suitable for SA.”

Tim Donovan: “Will undoubtedly have to increase rents. Other small time landlords I know are looking into tax avoidance schemes. It would not surprise me if some are looking into tax evasion schemes, simply because the tax rules are unfair and stacked against small time investors. Good job Osborne, making it easier for rich cash buyers to get richer, while making the rest of us into struggling criminals.”

Colin Wicks: “I’ve been a landlord for 18 years without selling any of my properties in all that time. My rents are below market rate. So what happens from here on, well, my rents will go up, and I will sell some of my properties to reduce the tax take of section 24.”

Mark Alexander: “My wife and I have relocated to Malta to enable us to sell some of our properties and pay CGT only on increases in value since April 2015. We have sold three properties so far when tenants have moved out. We plan to serve Section 13 notices to several tenants in Feb 2017 to bring their rents in line with market values as of April 2017. We have only previously increased rents when tenants change. We will incorporate our rental property business partnership in April 2018 as that is the best timing for us. In our case we will be using our expat status to sell our properties to our own company as opposed to claiming Section 162 incorporation relief, as that is more beneficial to us due to CGT on latent gains that would otherwise have arisen. As our partnership will have been trading for three years as of April 2018 we will also qualify for SDLT relief at the point of incorporation under schedule 15 of the finance act 2003. To avoid the costs of refinancing we will transfer the beneficial interests in our business to our company using a Declaration of Trust designed specifically for this purpose by Cotswold Barristers. We sought QC’s opinion on this from Giles Goodfellow QC at Pump Tax chambers. He confirmed the structure is effective and will not affect the security of our mortgage lenders in any way. Cotswold Barristers checked our mortgage T&C’s to confirm we would not be in breach. As we now have the assurances of two barristers, who have put their professional credibility and PI insurance on the line, we are confident in our decisions. We now recommend people in a similar position to us to contact Cotswold Barristers. We do not receive commission from them as that is prohibited under Bar Council rules. My wife and I have also incorporated our Consultancy practice which specialises in property, finance, tax and law and will now remit our dividend income to Malta and pay only 5% tax. Screw the British Government, they forced us into this and they will now lose revenue as a result of it!”

Sam Jackson: “I have 36 properties and by year 4 will either have had to sell or go bankrupt as my tax liability will increase ten fold. My tenants have mostly been with me for five years plus and they love their homes I have not increased their rents. Their lives will be greatly affected as even if another landlord did buy my properties it’s likely the rent will go up and they won’t be able to afford the increases. So many people’s lives disrupted and affected over night by disgusting tax law that should not be made retrospective. I will not vote Conservative ever again I cannot believe they are allowing this to go forward I will be increasing rents and looking to sell. I have no choice but to do this, it is not something I want to do. The tenants I have told are devastated and worried and want to know who they can write to . I’m going to do a draft letter for all of them to sign and send and even provide them with the envelope as I believe our power here is through the tenants as they are the ones whose lives will be so badly affected.”

Phil McKuhen: “Very similar to same but with just 17 properties. I have no idea how to tell my tenants. I know they can’t pay more as 90% are dss, and have big top ups now. As I have said a quarter have care needs linked to there properties that have been adapted by social services. But at the end of the day I will have to downsize to protect the few I keep. Hopefully sell 10 and pay the mortgages off on the other 7. It’s so wrong to be putting people homes at risk because a new rule knackers business decisions I made over a decade ago.”

Paul Rawson: “10 properties. This is simple. If I can’t get the rents up to cover the tax change I will sell up. Can’t run at a loss.”

Lou Valdini: “Re-mortgaged with a view to buying more BTL, but as a direct result of a combination of changes to CGT and s.24, I have not invested, but sold one property in London (went to an older couple downsizing, not a first time buyer!). I’ve also removed another from the rental market altogether due to size of the mortgage v rental income, which shouldn’t make any sense whatsoever, except if I had continued renting, I would have ended up paying a huge amount of tax I am not paying today. Better to live there as my main home while I consider my options! What a ridiculous situation Osborne and Cameron have left the rental market in!”

David Meek: “Had several property refurbishments lined up which have just been cancelled which were intended for new tenants. Just finished our last one which now being sold instead. Regretfully had to issue an eviction to a tenant with many more in the pipeline.”

John Mcgowan: “We have already sent out letters telling our lovely tenants that we will be forced to increase our rents soon due to Clause 24 (Tenant tax) luckily our rents are all below the average market level at the moment but we will be reluctantly increasing them over the coming months. Furthermore we will be selling one property a year making people homeless out of necessity or be bankrupted. We won’t be buying anymore unless in a company wrapper. This Tory government is the worst one since the end of the second world war and we will never ever vote tory again unless they show contrition by reversing their unfair tax grab.”

Rob Lamb: “9 properties. Have give notice to all tenants to expect substantial increases in rents from early next year, solely due to the new tenant tax being introduced. If they wish to complain I have included a draft letter and the address of the chancellor and my local MP. This is a totally unfair and misguided tax.”

Tarun Bithal: “Came out of employment because PAYE earnings are not worth the effort due to the way Section 24 penalises BTL income, which unfortunately makes it pointless to earn in any other capacity due to the excessive tax burden.”

The link again to the “Axe The Tenant Tax” Facebook page is https://www.facebook.com/clause24/posts/1287685751274426



Comments

NW Landlord

22:10 PM, 4th November 2016
About 2 years ago

I have 70 properties I have increased rents across the board for the first time in 14 years and will do so over the next few years just to keep afloat. the larger family homes I am evicting the families ( some 10 years my tenants ) selling to reduce my borrowing and to release equity to concentrate on new ventures ( due to s24) I will incorporate the rest and have stopped purchasing run down houses and turning them into family homes a year ago due to s24 ( was buying 2/3 per month )
As for the torys I will never vote for them again after voting for them all my life this has caused me and my family no end of stress and is grossly unfair and pointless and it will be the poor tenants that will suffer as I will adapt and move on

James Fraser

22:25 PM, 4th November 2016
About 2 years ago

Yep. Run-down houses aren't getting developed. 10-year tenancies getting their first (substantial) rent rises. Considering evicting and selling the first two out of 20-odd properties, both housing single Mums. Another single mum facing rent difficulties with the new rises is also battling cancer. I would do ANYTHING not to hurt this person but if I don't raise rent I have to sell. All my rents hugely BMV - won't be any more! Also have to start giving up other work/incomes to deliberately derelict my wealth to mitigate tax. After 30 years as party member and campaigning for them, wont be voting Conservative again until this is repealed, and even then may never forgive them. Insanity prevails!

DC

22:39 PM, 4th November 2016
About 2 years ago

My partner and I had 9 BTL properties, sold one in June, have a second one under offer. We have both given up our part-time jobs and will survive on my pension and the little income we derive from our rentals. We put rents up across the board last November where we were able and did so for the first time for tenants during their tenancies. We have just increased all rents where possible again this November.
Both of us have always voted Tory over past 36 years until the most recent local elections where we voted differently!! Unless the Tories do a u-turn on the Tenant Tax we will never vote Tory again.
Selling our main residential home and bought elsewhere in a much cheaper area. Been hit for the extra 3% Stamp Duty in the process so will see whether we will get the overpayment back in the next month or so when our sale completes.
This was not our plan and we wanted to grow our portfolio but it's now all about survival.

Denise G

9:47 AM, 5th November 2016
About 2 years ago

Due to fears around the potential impact for us of s24 we have started implimenting our exit strategy for our jointly owned properties a few years earlier than planned - and I will be selling one I own in my own name next because of tax advice received thus obliging the eviction of a long term tenant. I would I have kept this property til last due to the preferential mortage terms on it and the excellence, age and vulnerability of my current long term tenant were it not for s24

Carol Edwards

10:00 AM, 5th November 2016
About 2 years ago

My husband and I own 10 BTL properties, which has given us an adequate income for the last 10 years. Due the new tax changes and increase in legislation (all properties are in Wales, so we also have to register and licence to carry on our business) we have decided to sell them all as the mortgages come to an end in the next 16 months. We have already sold one with the intention of selling another at the beginning of next year. We feel there is no future in BTL properties for entrepreneurs anymore, only for investors seeking an alternative pension or property owners without mortgages.
COMPLETELY HAD ENOUGH OF GOVERNMENT MEDDLING!

Tricia Collick

10:12 AM, 5th November 2016
About 2 years ago

I have 4 properties, mostly small flats, my husband and I share another 3 and he has 1. (2 of which were formerly our prinipal residences,)
So even between us, we are not BIG landlords.
I am disabled and he is retired, so no income other than pensions and properties.
Even so, this unfair law may push us to sell up.
One mortgage is fixed for a number of years, so penalty clauses if I sell now !
I have £100,000 of losses to carry forward (from many years) so it won't effect us immediately but gives us time to plan , unlike others who I feel badly for.
So much for the stupid people who think being a landlord is a way of making a huge profit, it is more a way of providing those less fortunate souls a home because the councils don't.
Rents only ever increased before when tenants changed (so not often) but this will change now. We may slowly sell our small portfolio.
I will wait and see what Theresa Mays government do before I decide to change my voting habits away from the Tories, after all, this was conceived by Osborne taking advice from a very inexperienced source and they may even look at the Irish reversal of this stupid idea and decide against it (I live in hope) as they have their hands full with Brexit at the moment and I can't contemplate what the stupid Labour party might do to the British economy).
Nevertheless , some damage has already been done to poor tenants with rent rises.

Paul Green

11:24 AM, 5th November 2016
About 2 years ago

My question is as follows if I have a 3 month void period and collect NO RENT, but still pay the interest only mortgage of £500 PCM which is £1500 over 3 months, is this classed as income and therefore will I have to pay income tax on my mortgage payments less the 20% tax credit in 2020/2021 At my marginal rate? Even though I have not collected a penny in rent... Bizarre...

George Harrison

12:45 PM, 5th November 2016
About 2 years ago

Reply to the comment left by "Yasin " at "05/11/2016 - 07:43":

Yasin
Is it possible to go into any detail on this please

Paul Trumper

15:43 PM, 5th November 2016
About 2 years ago

We now have 28 properties remaining in our portfolio having recently sold two with another 3 for sale. We have been landlords for 15 years with our longest tenants having been with us for 13 years. We go to great lengths to work with our tenants to ensure they are well looked after and that our properties are extremely well maintained. We have invested heavily and upgraded all our older properties with new heating systems, insulation, double glazing etc. and consider ourselves to be caring and responsible landlords.

As a result of these attacks on PRL our long term business plan is shot full of holes and meaningless. We have put in place an exit strategy which requires us to sell 14 properties over the next 2 to 3 years and pay off the mortgages on the remaining 14. Whilst this will have significant Capital Gains Tax implications it will leave the remaining properties unencumbered thereby negating the tax on mortgage interest,

The net result of the attack on PRL by George Osbourne is that all tenants are being provided with a copy of Axe the Tenant Tax article and 14 long standing families will lose their family homes.

Will I vote for the Conservatives again - NO never again. However whats the alternative given Labours attitude towards Private Residential Landlords!!!!!!

Burt Richards

16:35 PM, 5th November 2016
About 2 years ago

Reply to the comment left by "Carol Edwards" at "05/11/2016 - 10:00":

If you haven't got any mortgages (in a few months time), what on earth are you selling up for ?

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