118 Landlords Panic and try lobbying MP's yet again

Jason74

cells wrote: »

Thats a very good point

But BTLs are also capital intensive. Sometomes upto or even exceeding 80% LTV. I supppse the difference is that there is an exit route in the form of selling up which might be impossible for a steel plant or similar

also will be interesting to see what happens to reits
also what happens to councils and housing associations. It would be bonkers to exempt them. That wpipd be cherry picking who does and does not pay a certain tax

I think on one level, this is a very fair point. Certainly, the tax change represents a situation where BTL is treated in a unique way. The question is whether this differential treatment is justified. For me, it very much is. The obvious (albeit very different) precedent for me is taxation of cigarettes. It is recognised that people smoking is generally a bad thing, and so the tax on purchasing that product is higher than the tax on most other purchases to discourage the behaviour.


I think it's entirely appropriate to apply the same principle to BTL. Now, I'm not going down the road of saying that all BTL landlord are evil or anything silly like that. Individual landlords are simply making a rational decision to invest in a way that secures their own future. As long as landlords then treat tenants fairly (and I think we'd all agree that there are good and bad landlords in that respect) they should not be pilloried for that choice.


But what I am saying, is that the scale of this investment has an overall social impact that is both negative and significant. It results in more and more people being housed in circumstances that are both insecure, and (in the long run) very expensive. This doesn't apply to social housing due to the secure tenure and subsidised rents (albeit these are increasingly threatened by Government policy), so treating the two differently is imho entirely appropriate.


So given that we have a limited housing stock, and given that BTL results in that stock being used in the tenure that is least beneficial for long term occupants, I think it's entirely appropriate that BTL is treated differently to most other enterprises in order to make it less attractive and discourage take up. Indeed, my hope is that this is the start of a process that at the very least, eventually sees tax relief on interest for BTL abolished altogether. I actually think that the way this has been done (tapered over time to allow for planning) is very sensible, and I hope that the model is used again for future interventions to disincentivise BTL.

Generali

With BTL you don't have to worry about margin calls or anything like that and as you say, you can sell for other purposes (e.g. owner occupation or perhaps to a HA). If you have a gas works or a steel mill, as you say, it's tough to find someone else with a use for it. Having said that a mate used to live in the Bryant and May factory.

As long as the income covers the outgoings you're fine and most BTL LLs can probably afford an occasional top up to cover repairs.

I guess the thing with these budget changes is that leveraged BTL just gets a bit less attractive to higher earners.

I suspect that it'll have little effect in London. In the Northern Hell Holes where you rely on yield rather than capital appreciation you could find these rules making a big difference to the market.

Graham_Devon

It's a none issue for many landlords. Two third's of landlords apparently own their properties outright.

It won't even be a large problem for newer entrants who have a lower level of debt.

It will only really be a problem for those who are highly leveraged.

In this respect, this does kind of go after the "right people" (IMHO). It goes after those landlords which have taken on a much higher risk...many having bought multiple properties with mortgages up to 80% of the property value.

This is the reason those landlords (who describe themselves as creative aspirational entrepreneurs in various guises on that forum) will stand to make losses. They left no room in their calculations for further expense.

It's notable that Mark Carney is talking to the select committee about the "buoyancy" of BTL today. Clearly this wasn't all Osbournes doing. Carney has several times made statements about the BTL risk.

ruggedtoast

Graham_Devon wrote: »

It's a none issue for many landlords. Two third's of landlords apparently own their properties outright.

It won't even be a large problem for newer entrants who have a lower level of debt.

It will only really be a problem for those who are highly leveraged.

In this respect, this does kind of go after the "right people" (IMHO). It goes after those landlords which have taken on a much higher risk...many having bought multiple properties with mortgages up to 80% of the property value.

This is the reason those landlords (who describe themselves as creative aspirational entrepreneurs in various guises on that forum) will stand to make losses. They left no room in their calculations for further expense.

Yes but this thread is about Buy to Let. Not Buy and Let with One's Own Money.

Buy to let by definition is fairly leveraged.

MARTYM8`

Apparently private renters voted Labour by more than 2 to 1 over the Tories in the general election. In London they are now more than 25% of the electorate - and include very many young professionals priced out of buying who would historically have been natural Conservative voters.

Its merely a sop to them - but I doubt it will make much practical difference.

No one really likes buy to let landlords as a class - bar that group themselves. Cos most people would rather have an owner occupier/first time buyer next door - not an endless stream of renters who have no interest in keeping up the place renting from a a landlord who may only visit the place twice a year. Buy to let landlords are almost akin to drug dealers - once they start buying up your street or block you know its going to go downhill.

BTL landlords will presumably always vote Tory - there are far more private renters who the Tories will want to win back.

paddyrg

SCENARIO AS OF TODAY
Rental income: £300,000 per annum
Mortgage interest: £200,000
Other legitimate expenses: £100,000 (e.g. insurance, letting, management, maintenance etc.)
Taxable income = zero.

SAME SCENARIO AS OF 2020
Rental income: £300,000 per annum
Legitimate expenses excluding interest: £100,000
Net taxable income = £200,000
Net cashflow is still zero but tax is payable on £200,000 less a tax credit of £40,000 due to the 20% relief on the £200,000 of mortgage interest.
Given that net cashflow is zero, where is the landlord expected to find the money to pay the extra tax from?
The position worsens when interest rates increase.

I for one am outraged that the kind, generous landlords who are doing such a sterling public service without making a penny should be penalised so cruelly that they will be forced to either have their cake or eat it.

The weasel words from this man entirely ignore the capital growth, and who the hell is he trying to kid that he spanks £100k/year on insurance and maintenance leaving himself penniless and destitute and unable to afford even the rent on one of his own houses.

I find this kind of lobbying greasy and sleazy, a group who removed a large pool of FTB properties from the market for personal gain whining 'oh poor me'.

cells

Generali wrote: »

With BTL you don't have to worry about margin calls or anything like that and as you say, you can sell for other purposes (e.g. owner occupation or perhaps to a HA). If you have a gas works or a steel mill, as you say, it's tough to find someone else with a use for it. Having said that a mate used to live in the Bryant and May factory.

As long as the income covers the outgoings you're fine and most BTL LLs can probably afford an occasional top up to cover repairs.

I guess the thing with these budget changes is that leveraged BTL just gets a bit less attractive to higher earners.

I suspect that it'll have little effect in London. In the Northern Hell Holes where you rely on yield rather than capital appreciation you could find these rules making a big difference to the market.

I just realised (while trying to work out an example of the impact in a steel plant) that it would not impact companies as no company is a 'higher rate earner'

That is to say with corporate tax at 20% and the 20% interest claimable its no impact. In fact if they reduce corp tax to 18% and keep the interest credit at 20% there would be an incentive for corpts to load up on debt.


I suspect one side effect if this change will be that BTL lenders might start charging very high upfront fees and very low interest rates.

Graham_Devon

You can't help but feel for anyone who has lost out as a result of a tax change. However, having just looked at the thread linked in post 1, any sense of that feeling is wiped out with the comments of other landlords.

One suggests it's completely outrageous that they planned their investments on the policies the government had at the time, and now they are caught out, facing a loss due to policy change. He literally states he has "housed people" as if he's done it out of the kindness of his heart and not for financial gain.

Firstly, surely policy change is always inevitable or at least a risk.

Secondly, they make out it's just landlords the (now evil) tories have targetted. It's clearly not. The very people they very likely rent out these homes to are losing hundreds if not thousands in tax credits.

Third, this insistence of saying "they are doing a good deed, housing people, giving people homes". It's laughable.

That initial thread truly does appear to be an outpouring of "it's not fair, I was incentivised, poor poor me" along with several ways of trying to carry out tax avoidance.

Seems quite a few are literally stunned that the party they voted for has hit their own pocket.

MARTYM8`

Graham_Devon wrote: »

You can't help but feel for anyone who has lost out as a result of a tax change. However, having just looked at the thread linked in post 1, any sense of that feeling is wiped out with the comments of other landlords.

One suggests it's completely outrageous that they planned their investments on the policies the government had at the time, and now they are caught out, facing a loss due to policy change. He literally states he has "housed people" as if he's done it out of the kindness of his heart and not for financial gain.

Seems quite a few are literally stunned that the party they voted for has hit their own pocket.

I really have no sympathy for them at all. Because personally buy to let is extremely bad for wider society - as it has involved buying up millions of the cheapest properties in the last decade which would otherwise have been bought by families/first time buyers who would then have secure housing. You should tax things that are bad - and incentivise things that are good. There is no justification for this interest relief for what is an investment not a business.

The Government has made massive changes to the pension system - as long term an investment as you can get that could affect your income for the last 30 years of your life. Don't recollect any mass public outrage about annual or lifetime allowance changes around that. Or moves from RPI to CPI uprating of pensions etc etc.

kabayiri

Generali wrote: »

...
One day a bunch of BTL investors will discover that risk is real.

Even cash savers discovered risk in the years following the GFC.