Posts with tag: mortgage interest tax relief

Angry Landlords Hope to Tackle George Osborne

Published On: January 4, 2016 at 12:26 pm

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Two private landlords have launched a campaign to challenge Chancellor George Osborne’s plans to cut the amount of mortgage interest that buy-to-let landlords can claim against tax.

Chris Cooper and Steve Bolton are seeking a judicial review of Clause 24 of the Finance Act 2015.

Angry Landlords Hope to Tackle George Osborne

Angry Landlords Hope to Tackle George Osborne

The changes were announced in the summer Budget, meaning that landlords will be taxed on turnover, not profits.

Some landlords could find themselves in a higher tax bracket and could even pay tax when they are making a loss.

Opponents believe that the changes target smaller landlords, with wealthier investors without mortgages and companies not affected.

Cooper and Bolton claim that Clause 24 breaches human rights and/or EU law.

Landlords have warned that as a result, rents will be pushed up, harming private tenants.

The pair had hoped to raise an immediate £15,000 and a further £35,000 on the website Crowd Justice.

The total £50,000 target has now been met.

Cooper and Bolton hope to tackle the changes, as they believe the new law breaches “a long-established principle of taxation that expenses incurred wholly and exclusively for the purpose of the business are deductive when calculating the taxable profits”.

Cooper is a part-time landlord and Bolton is the founder of Platinum Property Partners, a buy-to-let training franchise firm.

Bolton comments: “It’s not clear why the Government has chosen to just launch an attack on buy-to-let owner-operators with mortgages. It’s a tax from Alice in Wonderland – truly absurd and divorced from real life. Not only is this tax grab unfair, undemocratic and underhanded, but we believe that it could also be unlawful.”1 

The pair plans to hire Omnia Strategy to challenge the Chancellor.

A pre-action protocol letter will be sent to the Government this month, with an application for judicial review to be issued by 17th February.

A petition against the changes has also been launched. It is currently almost halfway to forcing a Parliamentary debate on the issue and will close on 27th January.

The crowdfunding page can be found here: https://www.crowdjustice.co.uk/case/clause24/

And the petition is here: https://petition.parliament.uk/petitions/104880

1 http://www.platinumpropertypartners.co.uk/articles/ppp-to-be-part-of-a-legal-campaign-to-challenge-government-on-proposed-changes-to-mortgage-tax-relief/

Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

Published On: December 21, 2015 at 4:06 pm

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Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

UK landlords are expected to claim £15 billion in buy-to-let property expenses, even under forthcoming Government changes to mortgage interest tax relief, according to new research from Ludlow Thompson estate agents.

When changes to tax relief are enforced in 2018-19, landlords will still be able to claim around £6.3 billion on interest payments made on loans used to purchase buy-to-let property, despite the reduction.

In the summer Budget, Chancellor George Osborne revealed that the Treasury expects total revenue to rise to £1 billion by 2020-21 after cutting the tax relief available to buy-to-let landlords.

Additionally, from April, the Government is changing the Wear and Tear Allowance so that investors will only be reimbursed for money actually spent on replacing furnishings and white goods, instead of being an automatic 10%.

Ludlow Thompson found that in the past year, tax relief on buy-to-let mortgage interest payments was the highest amount claimed, at £6.6 billion.

Chairman of Ludlow Thompson, Stephen Ludlow, says: “Even with the slight Government reductions to tax reliefs, buy-to-let still offers some of the most attractive tax breaks of all investments.

“There are still large incentives for potential investors, including significant tax reliefs for costs such as general maintenance as well as legal and professional fees.

“Averaged over the lifetime of a buy-to-let investment, recent tax relief and SDLT [Stamp Duty Land Tax] changes will have a very negligible impact on total returns to investors.”1

From April, buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty on purchases over £40,000.

Do you think these changes will greatly affect your lettings business?

1 http://www.propertyreporter.co.uk/landlords/btl-tax-reliefs-to-exceed-ã¢15bn.html

CML Predicts Buy-to-Let Market Slump

Published On: December 21, 2015 at 9:57 am

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The buy-to-let mortgage market will experience a slump over the next two years, according to the latest report from the Council of Mortgage Lenders (CML).

CML Predicts Buy-to-Let Market Slump

CML Predicts Buy-to-Let Market Slump

The study states: “Buy-to-let faces a challenging period, as changes to tax treatment and the prospect of macro-prudential intervention run counter to otherwise strong fundamentals. Buy-to-let house purchase activity in 2015 may peak and fall away below 2014 levels by 2017.”

The CML claims there are three main causes of uncertainty in the sector: forthcoming changes to mortgage interest tax relief from 2017; the extra 3% Stamp Duty on buy-to-let purchases from April; and the possibility of the Bank of England (BoE) limiting landlord mortgages from next year.

It warns: “Inevitably, these will adversely impact the rate of growth in the sector and even cause lending volumes to ease back.”

It believes that buy-to-let will account for 9% of all UK property transactions this year, much lower than the 2006-08 period. It also says that buy-to-let will account for about 16% of all mortgaged purchases.

The CML report adds: “Future prospects are closely tied to potential macro-prudential regulation and incoming tax changes. We currently expect buy-to-let house purchase activity in 2016 to fall below its 2015 level, and for activity in 2017 to fall below the level seen in 2014.”

Addressing the extra Stamp Duty charges, the CML says that a consequence will be higher activity levels in the first quarter of 2016, as buyers hope to avoid the increase before it is enforced.

The report concludes: “The scale in terms of transactions is likely to be in the low thousands, though the overall impact will be close to zero over 2016, as there will probably be a corresponding fall in transactions in subsequent quarters.”1

1 https://www.cml.org.uk/news/news-and-views/market-commentary-december-2015/

London Tenants Need to Earn Over £21k Just to Cover Rent

Published On: November 28, 2015 at 2:22 pm

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Tenants in London need to earn over £21,000 per year just to cover the rent, according to new research.

The average rent price in the capital grew to £1,467 a month in October, up from £1,402 in June, says the Rentify Property Index. This is more than a £21,000 annual salary, which provides an income of £1,447 per month after tax.

The study revealed that rents in London increased by 4.67% since June, with the greatest rises recorded in Greenwich.

Rents in Greenwich increased by £340 per month, followed by a rise of £210 a month in Brent and £197 per month in Newham.

Most expensive London boroughs to rent in

Position

 Borough

Average rent per month
1 Westminster £2,182
2 City of London £2,149
3 Kensington and Chelsea £2,030
4 Camden £1,836
5 Hammersmith & Fulham £1,776
London Tenants Need to Earn Over £21k Just to Cover Rent

London Tenants Need to Earn Over £21k Just to Cover Rent

Could these price rises be the result of the announcement that buy-to-let landlords will see their mortgage interest tax relief cut?

Earlier this year, Chancellor George Osborne revealed that this change would be gradually introduced from April 2017. By reducing the amount of tax relief that landlords can claim, investors could lose thousands of pounds per year.

Chief Executive of Rentify, George Spencer, says: “The high cost of rent in central London is continuing to drive people away to outer boroughs in search of affordable housing. This however, means that these so-called cheaper locations are seeing a remarkable rise in rent due to their popularity. They are hot on the heels with central London due to strong demands.

“Furthermore, the recent buy-to-let tax hike introduced by the Chancellor will further constrain supply as less people invest in property to rent, making life increasingly hard for Londoners.”1 

Rents dropped in areas such as Wandsworth, by £33 per month, and Kingston-upon-Thames, by £90 a month.

Cheapest London boroughs to rent in

Position

 Borough

Average rent per month
1 Bexley £1,064
2 Croydon £1,114
3 Sutton £1,118
4 Waltham Forest £1,146
5 Barking and Dagenham £1,192

1 http://www.dailymail.co.uk/property/article-3333353/Tenants-London-need-earn-salary-21k-just-cover-rents-s-not-including-bills.html

Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Published On: November 23, 2015 at 12:58 pm

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Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Landlord Calculator Launches Ahead of Buy-to-Let Tax Changes

Property Partner has launched a buy-to-let calculator for landlords to work out the potential impact of the reduction in mortgage interest tax relief on their income.

The property crowdfunding platform has introduced the calculator ahead of the changes, which will be phased in from April 2017.

Thousands of buy-to-let landlords will see a significant dip in their rental income when the maximum level of tax relief that can be claimed on buy-to-let mortgage interest drops from the current rate of 45% to the basic rate of 20%.

The cut is designed to create a balance between landlords and first time buyers, as well as raising billions of pounds in revenue for the Treasury. However, landlords in the UK are already taxed much more heavily than those in Germany, France and the USA.

Experts believe that the reduction could cause serious changes in the private rental sector, further limiting the supply of rental accommodation and subsequently pushing rent prices higher.

The Property Partner calculator will help landlords understand the impact of the changes. Landlords put into the calculator whether they are a basic rate taxpayer (20%), a higher rate taxpayer (40%) or an additional rate taxpayer (45%).

They then put in how much their bought their property or properties for, their total rental income per year, how much is left on their mortgage(s) and what interest rate they are paying. The resulting prediction indicates how much more worse off higher rate taxpayers will be once the cuts are fully implemented.

CEO of Property Partner, Dan Gandesha, comments: “Landlords were hit with a shock new tax in the summer Budget when the Chancellor announced that mortgage tax relief would be cut.

“Our buy-to-let calculator allows you to quickly and easily work out whether it’s still worth holding onto your property or not, and what other alternatives are available.”1 

1 https://www.landlordtoday.co.uk/breaking-news/2015/11/property-partner-launches-tax-change-calculator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Petition Against Buy-to-Let Tax Reform Hits 35,000 Signatures

Published On: November 2, 2015 at 4:02 pm

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Petition Against Buy-to-Let Tax Reform Hits 35,000 Signatures

Petition Against Buy-to-Let Tax Reform Hits 35,000 Signatures

An online petition against the planned buy-to-let tax changes has now surpassed 35,000 signatures, but it is still far from the target for triggering a debate in Parliament.

The tax reform, detailed by Chancellor George Osborne in the summer Budget, will see mortgage interest tax relief for buy-to-let investors cut to the basic rate of income tax, currently at 20%, even if the landlord pays the higher rates of 40% or 45%.

Osborne believes the relief will resolve “unfairness in property taxation”1. It is due to be phased in from 2017.

The industry has expressed strong opposition to the measure, with a website being created to explain how the new rule will affect not only landlords, but also letting and estate agents, tenants and pensioners. Take a look at Say “No” To George here: http://saynotogeorge.co.uk

The petition needs 100,000 signatures by the end of January to force a parliamentary debate.

However, its success has been set back in recent weeks, after the Chief Executive of the National Landlords Association (NLA) described it as “a waste of time”.

Richard Lambert said that even though exceeding the 100,000 mark sounds impressive, it means any subsequent debate by MPs would be “when ‘parliamentary time allows’, meaning that it could be months down the line, by which point the chance to affect change may well have passed”1.

You can find the petition here: https://petition.parliament.uk/petitions/104880

1 https://www.landlordtoday.co.uk/breaking-news/2015/10/petition-against-buy-to-let-tax-changes-passes-35-000-signatures