Section 24 Tax Reforms

by Mark Alexander

17:03 PM, 1st May 2018
About 7 months ago

Section 24 Tax Reforms

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Section 24 Tax Reforms

Thank you for your interest in the Section 24 Tax Reforms, which will result in:-

  • Massive rent hikes (as proven when a softer version was introduced in Ireland and is now being reversed)
  • Landlords selling their rental properties (causing homelessness for tenants)
  • Less private sector investment into building more homes

Section 24 Tax Reforms increases the tax payable on providing your home, just like when fuel duty, tobacco duty, and alcohol duty are increased by the Government so does the prices you pay. Either that or being evicted if the property owner is forced to sell up.

This Government Tax Grab isn’t fair on anybody and needs to be challenged, especially by people who cannot afford to pay more rent and those for whom taking on a mortgage to buy a home isn’t realistic. We all need to be working together to persuade the Government of its poor judgment and to repeal this ludicrous piece of legislation.

ACTION YOU CAN TAKE

The orange text below links to other pages.

To spread the word, why not print an image of our Billboard onto a piece of A4 paper and ask your local shops (especially letting agents) to display it in their windows and on notice boards?

How about putting it in your car window?

Maybe you could send a copy to your local MP or Councillor?

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Please share your ideas and successes in the comments section below.

Alongside our campaigning, Property118 has been helping as many private housing providers as possible to minimise the effects of the Section 24 Tax Reforms. By optimising the structure of their businesses to minimise, and in some cases to mitigate the extra tax, the impact on tenants is also reduced. You can read more about these structures via the link below.

Landlord Tax Planning

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Technical Information About Section 24 Tax Reforms

It has now been a year since Dr Rosalind Beck first published her paper on the Section 24 Tax Reforms, which has become widely known in the industry as “The Ros Report”.

Since then, Property118 has welcomed 1,000’s of new members who may be oblivious to this excellent piece of work. Accordingly, please see below a link to correspondence that ‘Ros’ had with The Treasury, and which also contains a link to the full report itself, which can be downloaded free of charge in PDF format.

The Ros Report: the Treasury defends the indefensible



Comments

Jamie M

18:19 PM, 1st May 2018
About 7 months ago

This outstanding piece of work by Dr Rosalind Beck is now the definitive document that exposes the governments attack on tenants and landlords. Section 24 directly harms all tenants security of tenure, All PRS landlords livelihoods, and their ability to supply much needed housing and their ability to increase housing year on year. It is depleting available housing at a time Britain is desperate for more homes to rent and to buy. It proves that it is a dangerous nonsensical hateful and destructive piece of legislation that directly harms everyone renting in the private sector and all private sector landlords.

It must be stopped NOW if chaos is to be avoided.

Peter

11:28 AM, 2nd May 2018
About 7 months ago

A little understood part of this section 24 is very significant.

One’s rental income, after allowable expenses, but BEFORE deduction of mortgage interest relief, is now added to all other income. Effectively therefore, if one has, for example an income of £30,000 from investment income or employment or pensions, and perhaps three or four buy to lets, your total income before deduction of interest payments move into the area above £100,000 pa. Tax is then deducted on your total income.

Above 100k, taxes are levied at an effective rate of 60%. That is, 40% income tax plus the progressive loss of personal allowances in the ratio of 50p allowance for each pound of income declared. One then obtains a 20% tax credit.

In short, you pay 60% tax and then get back a 3rd of it

So a lot of relatively small landlords are going to be very badly hit when the full section 24 tax reliefs are lost. In short things are worse than they look.

So, if you borrow for a buy to let, it doesn’t work. If you have cash, other investments seems less risky, less work and less headache.

In my view, this is the beginning of the end of Landlording as a profession.

What do you think?

Rob Thomas

11:08 AM, 3rd May 2018
About 7 months ago

Dr Ros's report is indeed outstanding.

Residential rented property held directly by individuals is now uniquely heavily taxed. You pay 3% tax on purchase, a higher rate of capital gains tax and tax on mortgage interest.

When you add in the very generous tax breaks available on other investments, such as ISAs and pension funds, there is now an extraordinarily unlevel playing field.

There is also an extraordinarily unlevel tax treatment between owner-occupiers and landlords. Owner-occupiers pay no capital gains tax and no income tax on their 'imputed' rent (i.e. the rental value of their home), this tax having been abolished in 1963. The government's argument that the removal of landlords' interest deduction was levelling the playing field with owner-occupiers because they receive no mortgage interest tax relief is therefore entirely spurious as homeowners are not paying the corresponding income tax.

Mark Alexander

15:31 PM, 3rd May 2018
About 7 months ago

Reply to the comment left by Rob Thomas at 03/05/2018 - 11:08
Brilliant comment Rob, I love that.

Would you mind posting it on the Section 24 billboard fundraiser page please?

LINK https://www.justgiving.com/crowdfunding/section-24-billboard

Rob Thomas

15:42 PM, 3rd May 2018
About 7 months ago

Reply to the comment left by Mark Alexander at 03/05/2018 - 15:31
Thanks Mark. Have reposted the comments as you requested. Let's hope the billboard campaign raises the profile of our message.

Kundalini

18:09 PM, 3rd May 2018
About 7 months ago

One could see something like this coming from 2008.

Rates were so,low returns in the bank so poor that many invested in the downturn, when property could be sourced for 70% less than my area currently costs.

The huge shift of money never went unnoticed but for a time the landlord was loved by estate agents, tenants and the government because without them, the market was depressed and would have stayed so.

QI ‘helped’ to raise prices as much free money got poured into the market by anyone capable of signing their names, and the market just about turned over.

Losing council stock but gaining private stock was a godsend - whilst it suited the gvt.

Our gvt is usually very predictable, they watch where the money goes, turn a blind eye when it suits and when the prices get driven up so high they offer their long awaited ‘solutions’, namely ripping off the investor.

Our country is bankrupt has been for a great many years they need to squeeze the pips out of any situation, has always been thus.

As a landlord myself, albeit very very small I don’t have a lot of sympathy for the much larger investor and I’m anticipating two things.

1) investors feeding off other investors very very soon, desperate to sell up in what will be a supply led downturn and

2) for the ltd entities that many have been advised to enter into to be attacked in some form or another, the gvt generally waits a while so this could be within 5-6 but I’m expecting something to change.

Unfortunately our ilk has been duped like a rat trying to escape the titanic, I only hope the small investors like me were similarly well positioned and prepared and it’s the small investor who isn’t likely to set up a ltd company and will be the first to fry when this heats up.

There is an essential place for us landlord in today’s market particularly after all the sell offs but free money, greed, over leveraging etc will eventually flesh out as the incumbent gvt at the time looks to buy the votes of the millenials and I don’t see these ‘escape vehicles’ being long term, as the gvt seeks to screw the lot of us.

B4lamb

21:42 PM, 9th October 2018
About 2 months ago

Know doubt I will be shot down in flames here but where was/is the tax relief for landlords who do not have a mortgage on the properties they let. Why would investors that borrow money to buy a property expect a special goverment privalage or gift that investors who have committed more of their ackrued wealth in properties to let? At end of the day when the mortgages are paid up those investors who had mortgages will benefit from owning a number of properties unless they were paying on an interest only basis. Why should the government give those investors special treatment. There is an option to incorporate and form a limited company however I understand that banks and building societies do not offer such generous interest rates to businesses so the incentive to convert a portfolio into a limited company can be counter productive. In other words the tax savings on interest is offset by a significantly higher interest rate. Know doubt many landlord property owners that have mortgages on their lettings will try to recover their losses by increasing rents but those without mortgages are not affected and can maintain competitive rents with reasonable returns. The good times are over and no amount of campaigning will overturn Section 24, try as you may. It was good while it lasted.

Mark Alexander

22:01 PM, 9th October 2018
About 2 months ago

Reply to the comment left by B4lamb at 09/10/2018 - 21:42
No, sorry, I do not know what you are trying to say. At the very least, the points you are making are unclear.

Are you suggesting that new landlords have the option of buying in Limited Company whereas established landlords have had the rules of the game they were playing changed retro-actively? If so, then I agree with that.

Are you saying that leveraged landlords are probably doing better than unleveraged landlords? If so, then I would probably agree with that to. That can probably be said for most business sectors though.

I do not agree that BTL lending to Limited Companies is more expensive than for private landlords. It used to be, but that is changing quickly. It is also easier to get a BTL mortgage in a company name than a private name now, since the rules of the game were all changed.

Section 24 is certainly polarising the market, but whether that's a good or a bad thing for the economy in the long term remains to be seen and will always be a hot topic of conversation meanwhile.

Gromit

23:03 PM, 9th October 2018
About 2 months ago

Reply to the comment left by B4lamb at 09/10/2018 - 21:42"Why would investors that borrow money to buy a property expect a special goverment privalage or gift that investors who have committed more of their ackrued wealth in properties to let? "
Borrowing money to expand a business thereby growing taxable profit is very common in every business sector; being able to deduct interest costs to generate that extra profit is an established principle, and has been incorporated in GAAP for centuries. The economy would grind to a standstill if businesses couldn't borrow to expand.
So interest costs are not a privelege at all but a legitimate business expense.
Without leverage my own portfolio would 4-5 times smaller, and the taxable profit 2-3 times less, and tax take 4-6 times less (no longer subject to higher rates of income tax). So the Treasury would lose out as well. Leverage is good for the Exchequer.

B4lamb

23:44 PM, 9th October 2018
About 2 months ago

Reply to the comment left by Mark Alexander at 09/10/2018 - 22:01
That is intesting Mark as other reports indicate business lending for property has attracted higher inteest rates from the main lenders so if that is changing then what stops small investors currentky operating as Sole traders setting up a limited company and transferring their properties to this company. There is a lot more administration work with a limited company but all interest can then be offset against profit to reduce tax burden. The issues then may be what happens when you decide to wind down the business in years to come. Most people I know have bought properties for letting as a side line alongside their day job as a way of getting a better rate of return compared to savings in a bank or building society. To operate this as a limited business is often a step too far.

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