Shadow Chancellor John McDonnell anti Buy to Let but said very little

Shadow Chancellor John McDonnell anti Buy to Let but said very little

10:38 AM, 29th September 2015, About 9 years ago 44

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During his first speech as Shadow Chancellor John McDonnell hinted at his views on introducing rent controls and stopping tax breaks for Buy to Let landlords without actually giving much away in detail.John Mcdonnell

The Labour party have estimated that tax breaks to Buy to Let investors are worth £13billion per annum and it is understood that if they were to get into power they would be looking for the ability of landlords to offset costs against taxable income to be abolished. Thus sending many property investments into a negative cash flow position.

From the transcript of the speech McDonnell said: “There will be cuts to the billion pound tax breaks given to buy to let landlords for repairing their properties, whether they undertake the repairs or not.”

“And cuts to the housing benefit bill when we build the homes we need and control exorbitant rents.”

What exactly this means for his plans on the taxation of Landlords and the instigation of rent controls in the Private Rented Sector has been left wide open.

Mr McDonnell also criticised the Bank of England for missing the inflationary target of 2%. He indicated that although  the Bank of England would be kept independent from politically lead decisions he would be looking for a much wider economic objectives than just inflation.

McDonnell said: “I will also be setting up a review of the Bank of England.

Let me be clear that we will guarantee the independence of the Bank of England.

It is time though to open a debate on the Bank’s mandate that was set by Parliament 18 years ago.

The mandate focuses on inflation, and even there the Bank regularly fails to meet its target.

We will launch a debate on expanding that mandate to include new objectives for its Monetary Policy Committee including growth, employment and earnings.”


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Comments

Laura Delow

14:55 PM, 6th October 2015, About 9 years ago

Hi Diana - unless already doing so - see thread of conversation going on between Property118 Landlords under "Summer Budget 2015 - Landlord Response".

James dengel

15:31 PM, 12th November 2015, About 8 years ago

Reply to the comment left by "Ed Atkinson" at "05/10/2015 - 12:48":

Ed,

The effect is far greater than what you have suggested unfortunately because they have changed finance payments from a cost to relief it affects the total income.

if you had an rental income of 200K and finance of 180K you would currently have a profit of 20K
11K personal allowance
9K at 20% tax
awesome no issue.
All other savings will be at 20% tax rates

under clause 24K
rental income 200K
work out all taxes and benefits at that level.
income 200K
no personal allowance. This disappears around 150K income
first 32K at 20%
next 130 odd at 40%
rest at 45%

any Child benefit for your partner will be repayable.
tax on savings will be at 45%
kiss good bye all other benefits that are means tested.
then you get get a relief of 20% of the 180K interest payments.

Still have to pay the 180K interest payments by the way.

This is why people are upset about the changes, it's not just a little more tax, it complicates everything because it means incomes are inflated which has a knock on effect on many other things. not just a little more tax to pay.

Ed Atkinson

16:43 PM, 12th November 2015, About 8 years ago

Thanks James, I get what you are saying on all the other aspects brought in if the profit before interest payments is high.

My only come-back is that the example numbers you gave are for an extremely foolhardy investor. Interest rates are nearly 5% below their long run average. We should be able to take a rise of about 3% in rates, which for many is doubling of the actual interest charges currently being paid. For the sample numbers this expected adjustment in interest rates will swamp any damage by our dear friend George O.

James dengel

10:49 AM, 13th November 2015, About 8 years ago

Reply to the comment left by "Ed Atkinson" at "12/11/2015 - 16:43":

I agree I certainly wouldn't want those numbers to be me as it's a lot of debt, it just the unintended side affects that I don't think they have thought through.

I am affected as I will both be pushed into the 40% bracket and have to repay child benefit.

I don't mind paying more tax on property income, but it becomes so much more complicated in general once these things come in.

I was doing self assessment but once this comes in I think I'll have to get an accountant because of the knock on effects. Yet another thing to pay for.

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