Prepare For (And Fight Against) Landlord Tax Increases

This blog post is probably long overdue.

Actually, it’s definitely long overdue according to the surge of emails I’ve received over the last several months, from people with a profound passion for the letting industry, urging me to reach out to ‘you lot’ so we (landlords) can all band together to fight against a seemingly dogshit incoming tax change, which many believe will cripple the letting industry. Oh, so dramatic!

“Why haven’t you done it already? This is important! Why don’t you care?” is what’s been getting drilled into my poor little my ear-holes.

Don’t be like that. I do care. You know I care (even though you find my website and splutterings repulsive, and are only engaging now for the purpose of tapping into my readership base, but it’s cool, because fortunately this horrid little ogre doesn’t need any friends. Sigh).

I really do care about the cause, but at the same time I seem to value my uncompromising need to blog ‘about what I want, when I want‘ above anything else. So unless the mood strikes and the conditions are optimal, I’m generally an obsolete pile of slosh. It’s a real curse, but I’ve made my peace with it.

I was always going to discuss the new tax legislation at some point, but despite how inevitable the discussion was, delaying it was a stroll in the freaking park. Case in point, I chose to blog about Garden Fence Law before blogging about the new tax legislation, so you can only imagine how far down the pecking order it was. Can you even imagine how hollow someone’s life must be in order to write about bloody ‘garden fences’ during their leisure time, let alone ‘taxation’? Yeah, I feel sorry for me, too.

But let me stress, don’t allow my repugnant attitude sway you away from the importance of this blog post. This will probably be the most important post I’ll ever write (but that’s really not saying much). Plus, I don’t think I can continue to fob off the figureheads (i.e. the people with influence and power in the letting industry) for much longer, whom have been asking me to do this for quite some time. And, we all know how irrational and irate a bunch of hippies with a cause can get if someone slows down their progression, so obviously my fear is they’ll eventually start posting dog-shit through my letterbox.

So, I’m going to do the right thing by everyone and spread the word. And by “everyone” I mean me, because I don’t want dog-shit through my letterbox, or a bunch of angry people that smell of urine loitering outside my crib.

Many of you will already be aware of the incoming tax changes, ‘Clause 24’, particularly those of you that feel comfortable with betraying me by wasting time on other landlord websites. Everyone seems to be talking about it… but me.

Reluctantly, I’m going to jump onto the bandwagon, but I’m going to avoid going into the lengthy details of the clause, because quite frankly, they’re boring as shit; it involves a lot of nasty stuff like maths and elaborate explanations for why the clause is so unbelievably cancerous. I think I’ll stick to the basics, or at least, what I feel are the ‘essentials’. But don’t worry, I’ll provide links to other useful resources, where you can read more of the snoozy-details, so at least you’ll have the option of boring yourself to death.

2015 Summer Budget & Clause 24

Osborne-Budget

As part of the 2015 Summer budget, the Chancellor of the Exchequer, the pompous twit George Osborne, announced that from 2017, there’s going to be an increase in tax for private buy-to-let landlords. More specifically, landlords will no longer be able to offset mortgage interest costs against rental profits before calculating tax.

So, let’s suppose you receive £1,000 PCM for your BTL. £600 goes towards the mortgage payment; £400 of which goes towards paying the interest of that mortgage, while the remaining £200 reduces the capital. Based on the current tax legislation, you can offset the £400 interest payment as an expense, which reduces the taxable net profit, and rightly so.

The new legislation will no longer allow you to offset the interest on your mortgage payments! It will be added to the taxable net profit. OUCH! How about that for a kick in the gonads?

Why are landlords in upheaval about this legislation? It’s not just because the increase in tax will take a sledge hammer to our profits, but it’s also because this legislation is only being applied to individual landlords, while every other type of business in the UK will be able to continue off-setting their total costs against their income before being taxed on their profit. Even corporate companies that manage large portfolios of real estate, who are effectively landlords, won’t be subject to the new legislation, so in true Tory style, they really are going after the little guys, while keeping the rich… rich. People are now questioning the actual legality of the clause.

IT’S A DARN RIGHT OUTRAGE, ISN’T IT? HOW COULD THEY?

Holy Mackerel, I need to calm the hell down. I almost gave myself a nose-bleed. *deep breaths*

The effects of Clause 24

As a result of this new legislation, many thousands of landlords will find themselves being taxed on loss-making buy-to-let properties and see massive increases in the percentage of tax payable. Many will be shoved upwards into a higher rate tax bracket, even though in reality they will not be making a single penny of extra income!

It should also be noted that the Government already collects tax on the mortgage interest paid by landlords – it takes it from the profits made by the mortgage lenders. So not only does the legislation victimise individual mortgaged landlords, it’s also a double taxation policy.

And of course, inevitably, as it always does, these extra costs will quickly find their way filtering down to the bottom of the chain, all the way to the tenants, which will further increase rental prices in an already unmanageable market.

I refuse to believe the Government aren’t aware of how this will pan out, because it really just boils down to basic economics (i.e. if you increase production costs, the retail price of the commodity has to increase), so it kind of makes you wonder who screwed who to make this ludicrous legislation happen. Others feel the same, and that’s why they’re calling it the “Tenant Tax”

How to support the fight

Fortunately, and perhaps surprisingly to many of you, there are people out there with a lot more dedicated time, compassion and desire out there than me, who are willing to make a stand. A strong one.

A couple of Robin Hood type characters, Chris Cooper and Steve Bolton (no idea who they are. Probably a couple of ‘portfolio landlords’ that stand to lose a buttload of cheese through the new tax clause), started a crowdfunding campaign earlier this year, to raise £250,000 (bloody hell, hoooooowwww much?! Right?), with the purpose of funding a mutually beneficial cause for all UK private landlords: a legal process called a ‘Judicial Review’, with the goal of overturning the proposed ‘Clause 24’

Intense.

Here’s Steve’s cute little plead:

I like the cut of his jib. This seems to be legit. There’s a staged plant and a proper branded ‘Tenant Tax’ placard and everything. Well, I’m impressed.

They even managed to perk Cherie Blair’s interest, and she seems to be quite involved with the campaign. Here’s an interview by Vanessa Warwick from over at PropertyTribes, where Cherie explains more about the Judicial Review:

Donations

£50,000 was raised in the first 8 days of launching the campaign, which is pretty remarkable. But I think the generosity of the people has since plateaued as we’re still significantly far away from the target. Below are the current stats, as of 23rd June 2016.

Target
£250,000

RaisedBackersDays Left
1121 0

Check the Crowd Justice page for the latest figures.

I’m not actually sure what happens if the target isn’t reached. Anyone?

Donating & more Info
You can also read more about the campaign and legislation over at the Crowd Justice page (but go there after you’ve finished with me, I’m still talking!). And if you’re feeling rather generous and believe in the cause then you should definitely donate towards it. Plus, if they suddenly get a surge of donations it will get traced back to this hellhole website, and maybe then I won’t be seen as leper by the community, and maybe I’ll start receiving invites to all the swanky landlord gatherings/conferences I enviously hear so much about. You want to help me make friends, don’t you?

As my boy Bolt’s says in the video above, “please do all you can” (I’ve literally never spoken to the dude in my life, but I already feel a connection and utterly comfortable with calling him “Bolt’s”).

Donate NOW!

Spread the word
Needless to say, donating is 100% optional. But spreading the word isn’t, so open that pie-hole of yours and tell someone. Anyone!

Fuck it, tell someone that doesn’t even care; someone that isn’t even a landlord. Information has a strange way of filtering down to the darkest of pits and falling onto the right ears. Hopefully filthy rich ears.

After I’ve written this blog post, I’ll probably knock on my neighbour’s door and force-feed him the details (I definitely won’t be doing that, but I want to inspire).

I’m going to donate £50,000 (no, I’m not doing that either, but I want to inspire).

Donate NOW!

(I think 2 obnoxious donate buttons is enough. I’ve officially done my part).

Important update (10th October 2016)

It appears as though the campaign to challenge the BTL tax change as unsuccessful (more details over on the PropertyWire website. The tax changes appear imminent. I’m sorry!

Making preparations for the incoming changes is imperative! Perhaps the following is more crucial than ever… back to the original blog post…

Tax Calculator

Upad have crafted a nifty little Tax Calculator which can assist you in working out how much extra tax you may have to pay when (or optimistically… “if”) the new legislation comes into play. Here it is. You should check it.

Prepare for the worst. Always!

I’ve a read a few articles on the new tax legislation by various reputable letting/landlord outlets, all emphasising the catastrophe that is fast encroaching, and how we should all huddle together, hold hands (I’ll probably be lumbered next to someone grotesque that doesn’t use hand sanitizer, great), sing ‘Kum Ba Yah’ and support the fight against the terror. Apparently this will be the biggest fight of our lives.

Like I said, dramatic.

I’ve personally felt more passion running through my veins when fighting over the last Ferrero Rocher in the tray (I know we’ve all been there, those things are little nutty balls of heaven), but perhaps that’s the problem, and why so many of the active rally leaders’ in the community are getting so irate- there’s currently an utter lack of exposure and relatively small dollops of support. They believe every landlord in the UK, approximately all 2 million of them, should be supporting the fight. If we all just gave £1 each…

So far, with approximately 1,000 backers, we’re still missing interest from about… 2 million people. I don’t know whether to cry… or make the most of it and laugh hysterically. I’ll most likely do the latter.

Seriously, if you can, you should donate and/or spread the word. It’s genuinely a good cause, organised by genuine people (from what I can tell), and the fight is the right fight, which you will most likely benefit from. For example, if you donate £100, and that money is eventually used to overturn the legislation, you could stand to make several thousands of pounds in savings.

However, while the legislation will, for sure, affect most of us, I also sense there’s an element of total irresponsibility surrounding the issue. While everyone is focusing on rallying the troops, and largely scaremongering in the process, which can be arguably justified, there seems to be a distinct lack of pragmatic thinking, although I understand why.

Right, so let’s be real about this…

I don’t know the facts or figures, but I can imagine that the amount of legislations that have been overturned in similar situations remains in a singular digit. I’d go as far as to say it’s unheard of. The Government need and want more money, and over the years landlords have proven to be a reliable cashcow, so the idea of stopping the legislation is glaringly, woefully optimistic.

What I’m saying is, you should prepare for the increase in tax, even if the fight for justice looks to be making progress in the right direction, which it is according to this recent article by the RLA: “The RLA’s relentless campaigning to challenge proposed restrictions to mortgage interest relief is starting to make an impact in Westminster, with a surge of support from Tory backbenchers.”

Personally, I’m not sure which way it will swing; I know which way I would like it to swing, but I know I wouldn’t bet on the stable boy to be victorious (I wouldn’t bet against either).

Let me clarify something important…

The primary goal of this blog post isn’t to make you aware of the Crowd Justice campaign or grovel for donations, despite the big red donate buttons and the lengthy introduction. You don’t have to part with your cash (even though you probably didn’t work hard for it, because you’re a lazy, rotund landlord, leeching off societies most vulnerable).

This isn’t even about the tax legislation. Fuck the legislation in the ass! This may displease the Church Elders of the letting world, as they probably would have preferred me to optimise this page for squeezing donations out of your tiny little rectums, but as always, I’ve got to do this my way. I believe there’s a bigger and more important message here, which every landlord out there should digest before it’s too late.

The primary goal of this post is to enforce a friendly reminder to everyone, including myself, that we should always expect and prepare for any change, including the Clause 24 tax legislation. As it stands, it’s still coming hard and fast… (you’re expecting me to stoop to my usual unnecessary lows here, but I won’t! But YOU KNOW).

Ironically, while the tax legislation doesn’t treat us like any other business, we need to respond like any other business, and that is by adapting to the market. Don’t sit idle and wait for the storm, you’ll probably drown with your shrivelled-up pecker in your hands. You’ve been warned in advance and you’ve got a reasonable amount of time to prepare.

The reality is, if this storm does drown you, it won’t be because you failed to donate, support or stop this one particular legislation, it’s because you sat and waited until it was too late. This added tax costs is nothing new as a ‘concept’, it’s merely another expense among hundreds of others, albeit, an insanely unfair one. Just like the recently introduced landlord licenses, which is just as equally horrendous, and in many cases will cost landlords more than the heightened tax bill they may face.

The thing is, even if Clause 24 gets overturned, another evil will inevitably surface with the same intent; looking to diminish your profits, whether that be on a domestic level (e.g. the need to replace a boiler) or another mass scale attack against landlords and the industry. We won’t be able to fight every fight, it’s futile.

Yes, the tax legislation is a sizzling pile of shit and I wholeheartedly believe in fighting it. But the pragmatist in me is urging everyone to spend the ‘majority’ of their time trying to absorb the cost, as opposed to fighting it.

Absorb & adapt to the market

My advice? Talk to a specialist accountant that is familiar with landlord tax, and find out how much of an impact Clause 24 will have on your dwindling finances, and then plan accordingly. Do the maths, and stress-test the figures. Just make sure you’ll be safe if shit hits the fan. Trust me, if you prepare and embrace the tax change, you’ll be happy whether the legislation gets revoked or not.

If you think you might struggle with the new tax change, start preparing now. If you want to keep hold of your investment(s), think of ways you can absorb the costs. I’ve written several posts on how landlords can save money, which may help you reshape and maximise your profits. But I’ll go over a few of the main one’s below.

While you should already be doing the following regardless, for both short and long term gains, I appreciate we don’t all start swimming until we’re thrown in the deep end…

*The Landlord kicks you into the deep end*

  • Remortgaging
    It’s still a massive mystery to why so many homeowners (not just landlords) don’t look at remortgaging at every given opportunity. Relatively speaking, it’s by far the easiest and quickest way to massively rein in the outgoings!

    Even if you can find a mortgage product that offers a puny 0.1% reduction in interest, you could still potentially save thousands, and therefore instantly absorb the costs of the repulsive new tax legislation in one hit!

    If you’re interested, here’s a more detailed write-up of my most recent experience of remortging a BTL.

  • Make a lump sum payment to reduce mortgage
    You never know, reducing some of your mortgage debt with lump-sum payments may work out better for you. Equally, it might be worth switching to a repayment mortgage if you’re currently paying interest-only. This is where a good tax accountant will be invaluable.
  • Regularly look for better deals
    I honestly believe most landlords miss a trick when it comes to service renewals (i.e. insurance, agency fees etc.), and that’s mostly due to obscene levels of laziness.

    Companies that work on the premise of annual subscriptions prey on laziness. They rely on people to avoid the 10-20 minute chore of looking for a better deal when it’s time to renew a policy, which is typically once a year. The sad reality is, most people are THAT lazy, so they just go ahead and renew the policy with their existing providers.

    9 out of 10 times, you’re existing provider won’t be offering you a competitive deal. They’ll be offering you the “lazy asshole” deal, which is usually 30% more expensive.

    Last time I shopped around before renewing my landlord insurance policy I saved £250, and it took about 20mins.

    PLEASE, just shop around when it’s time to renew! Do it for me and your children.

  • Minimize void periods
    Be organised and minimize void periods in-between tenancies.

    Think about it, by simply slowing down the process of finding new tenants by 2 weeks, you can easily lose £400 in rent (based on rent being £800 PCM). Even if you half that period by working a little quicker, you’ll save £200. It really does boil down to being organised and prepared.

    There’s more information over at the finding tenants quickly section!

  • Obey the law
    This is a bit of a quirky one, and perhaps it has no place in this list. But screw it, I’m doing it…

    Landlords are continuously being persecuted for failing to comply with the law. Actually, this is probably one of the quickest way to vapourise profits into a puff of smoke, and it’s definitely more devastating than any tax clause.

    Be a good boy, comply with your landlord legal obligations if you aren’t already. It’s so much cheaper than being sued.

  • Avoid & prepare for bad tenants
    See, the thing is, while this whole tax legislation is unfair and will jeopardise your monthly Range Rover lease payment, one asshole tenant can jeopardise your entire fortune.

    Reduce the chances of harbouring donkey tenants by undergoing thorough tenant referencing. But just as crucially, always prepare for donkeys (because some times they’re just unavoidable) by keeping tenancies short, having a tenant and considering RGI (Rent Guarantor Insurance).

    Let me illiterate, good tenants are crucial to turning a healthy profit. You will NEED good tenants to help you through the tough times.

  • Minimize tenant turnover
    The most important point in the list, in my opinion.

    If you have good tenants, don’t do anything stupid like unnecessarily increase rent. Keeping rent reasonable/low in exchange for retaining good tenants is almost always cheaper than pissing off good tenants and giving them a reason to terminate the tenancy.

    Despite popular belief, increasing rent isn’t the best way to survive in a tough environment. The best way to survive is keeping the cashflow steady, and you cannot do that without good tenants. I’m not saying don’t increase rent, I’m saying you might be better served being ‘reasonable’ over brash.

  • Scale back if you’re struggling
    If you’re fortunate enough to be a portfolio landlord, it might be worth selling a few of your properties and using the capital to reduce mortgage debt on the remaining. It’s a move that will undoubtedly be a kick to the ego to those that like accumulating, and it is a gamble, because the legislation might get squashed. It’s your call.

    It is extreme, but so is bankruptcy. There’s also a lot to be said about coasting through life in comfort as opposed to fear.

  • Offset every expense like your life depends on it
    Stack up every expense you can against your tax bill.

    While you may lose the ability to offset your interest payments, there maybe other expenses that you can offset, which you currently aren’t e.g. the cost in fuel for going back and forth to your BTL, the cost of your PC which runs your landlord software on, even the cost of communicating with your tenant and/or agent, and the food consumed during renovation periods etc. Again, a good tax accountant will let you know what you can get away with. The really good accountants will manage to find a way to offset pretty much anything, including a pair of nail-clippers.

    Offset every last fucking penny.

  • Operate as a company
    According to this article on ThisIsmoney it might be worthwhile operating your portfolio through a company if you have 10+ properties, because you’ll benefit from company tax breaks that are otherwise unavailable to private landlords. But bear in mind, there are added costs and hassle associated with running a company.

    Again, a good accountant will be invaluable here!

If you’re not doing ALL of the above (which is only the tip of the iceberg), I have no doubt in mind, you’ll be able to find ways to absorb more nose-bleed costs than your balance sheet is currently showing.

Workout how much this tax change is going to cost you, and make the changes you need to make in order to absorb the shit out of it.

Why I’m not worried, and perhaps lack empathy

If you made it this far, you maybe getting mixed signals, and wondering what side of the fence I’m on. So let me explain:

  • I want landlords to support the fight. It’s a worthwhile fight, because the legislation is bullshit, and plagued with corruption.
  • I want landlords to be aware of the tax change and make sensible preparations.
  • I don’t think it’s sensible for landlords to rely on the legislation getting overturned.
  • I want landlords to focus on being prepared for any change, not just the incoming tax change.
  • In this very specific situation, I think it’s fundamentally more important to ‘prepare’ than ‘fight’.
  • I want landlords, particular new landlords, to realise the concept of unforeseen expenses, even unfair ones, is the nature of any business. The concept of a ‘new expense’ is nothing new.
  • The amount of risk your open to will depend on how you have invested.

I’m going to touch on my last point in a bit more detail, although I’m not sure if it’s the right time or place, because it might be like rubbing salt in the wounds. My ex-girlfriend always used to tell me there’s a time to listen and there’s a time to point out mistakes, and I never knew the difference. Needless to say, I dropped her like a bad cold! What an absolute PMS’ing bitch, right?

I want to emphasise, the impact of this tax change will affect a very specific investment strategy the hardest (it’s the same strategy that almost always gets walloped when extra costs incur)!

I’ve discussed my investment strategy in detail before; it’s an extremely low risk strategy, and the nature of its design is to withstand volatile climate changes. In short, I try to reduce debt as quickly as possible in order to buy outright, so I put down lumpy deposits and make overpayments when I can. It’s not the most profitable model, but it’s quite safe. Hold on, let me tuck my penis back into my knickers. Right? But coincidentally, it’s the perfect model to stand strong against the tax legislation (i.e. smaller the mortgage debt, the smaller the interest payments).

That’s why I’m not worried about the tax change on a personal level. Yes, the legislation is unfair, so I’m going to help fight it, and it will painfully eat into my profits, but I’m prepared for the change and I can absorb it, while still turning a profit that makes my investments worthwhile.

Let’s not kid ourselves… this change is going to affect ‘portfolio landlords’ that are up to their eyeballs in mortgage debt the most. Their main objective, at some point, was to expand as quickly as possible with very little equity, and mostly rely on property prices increasing. It’s a flimsy model, which by nature is fundamentally prone to topple rather easily. If you’re going to play that game you need to take responsibility. That said, us landlords shouldn’t be victimised, and I’m on the same side as those with whimsical house-of-card type portfolios, even though I think they’re freaking insane for walking down that path in the first place.

If anyone has any thoughts, comments… you know what to do, grab the mic! It’s appreciated as always, and I’m genuinely curious about the following:

  • 1) Were you aware of the new tax legislation?
  • 2) are you going to support/donate to the campaign?
  • 3) how is the legislation going to affect you?
  • 4) have you made any preparations for the change, or are you going to? I know of a few landlords that are currently scaling back their portfolio, and taking advantage of the insanely high property prices!

So, that’s me done for another month or so, or whenever the mood next strikes. There’s no real pattern, other than obscene amounts of coffee and boredom-endued suicidal thoughts.

Goodluck everyone! Power to the people! x

P.s. you should support the fight and donate if you can.

Like this post? Then maybe you should sign up to my FREE newsletter so you receive more like it!

42 Comments- Join The Conversation...

Guest Avatar
Benji 12th June, 2016 @ 13:51

Good post- although you've come late (which is a bit ironic considering your premature ejaculation problem).

1) Were you aware of the new tax legislation?

Yup, I had a whiff of it a couple of years ago from a very good source. But I didn't believe any government would be daft enough, let alone a Conservative one. It did give me pause for thought however and I made some adjustments. Since this came in I've been busy, hence not posting for a while.

2) are you going to support/donate to the campaign?

I've surrogate contributed from the £10000 NLA donation. I reckon Shelter should bung in a hefty contribution as well if they genuinely want to help tenants. End of the day though, however unfair, this will weed out the competition.

3) how is the legislation going to affect you?

I'll pay more tax but I'll be better off and do less work.

4) have you made any preparations for the change, or are you going to? I know of a few landlords that are currently scaling back their portfolio, and taking advantage of the insanely high property prices!

Yep, deleveraging, sold some and continuing to do so, putting up rents and building up reserves. I've sorted some of my mortgages onto 5 year fixes and kept the lifetime BofE +2% ers. I've now got out of DSS.

I've also got reserve plans of sweating the properties more but that would mean a lot more work.

"If you have good tenants, don’t do anything stupid like unnecessarily increase rent. Keeping rent reasonable/low in exchange for retaining good tenants is almost always cheaper than pissing off good tenants and giving them a reason to terminate the tenancy."

With no respect whatsoever, that is complete bollocks which I suspect you have posted to appease the HPC nutters. I have half a dozen properties I want to get rid of with crap yields. I have phased in 10% rent increases to good tenants as I want one of them to move to utilise the annual CGT allowance. They have all paid up and have no intention of leaving. It will be the same phased increase again next year.

I have been lucky with voids on the remainder, only getting them one at a time. Usually I get none for ages then 5 all at once. Because I have been in this position, I have been able to push rents. Market rent + 5 or 10%. How many times have you heard some muppet say they charge below market rate to get good tenants? Well if they are charging below average, it follows that someone (me!) is charging above. And it makes not a blind bit of difference in getting good or bad tenants. I've also noticed, definitely in a couple of cases, that letting agents are following suit and I have set new market levels.

Whilst you might not be much affected by this now, have you considered they might go further and scrap interest 'relief' altogether? And by the same rationale, why should you be able to offset costs of replacing a boiler but 'hard working homeowners' cannot? Another anti-business playing field leveller?

1
The Landlord Avatar
The Landlord 12th June, 2016 @ 20:06

@Benji
I don't care in what context, I always like it when you talk about my ejaculation. In any case, better late than never. As long as the pipes get cleaned.

The steps you've taken are pretty interesting, and hopefully will encourage others to take the necessary steps to secure their investments. Out of curiosity, what was your specific reasoning for getting rid of DSS? And what rate did you manage to get for your 5yr fixed mortgages?

Despite your disclaimer, your voice in my head was very respectful and gentle, so thank you for that. We'll have to agree to disagree about rent increases. As for HPC... pfft.

And to answer your question, no, I haven't considered what would happen if offsetting costs against tax was revoked altogether.

Your absence was noticed and I'm flattered you took time out of your busy schedule to see an old friend!

2
Guest Avatar
Kitkat 13th June, 2016 @ 06:39

1. Yes I was aware of the legislation.
2. I might but not thousands. I will however tell other landlords about it.
3. As far as I'm aware it won't because my husband and I are 20% tax payers. I'm now wondering if I can greedily increase rents if it falls in line with other landlords.....
4. No prep because I need to read more (I prepare my own accounts so I'll have to know how it works a bit better than I know now)

3
Guest Avatar
Fred 13th June, 2016 @ 06:42

Thanks for the article, but please ease up on the constant facetious comments, it pads out the useful content no end and makes the good stuff harder to read...

4
The Landlord Avatar
The Landlord 13th June, 2016 @ 06:51

@Kitkat
Nothing greedy about increasing rent as long it's reasonable and competitive, in my opinion!

Thanks for the feedback, appreciated :)

5
The Landlord Avatar
The Landlord 13th June, 2016 @ 06:53

@Fred
You're welcome, and I'll do my best (but I think we all know how that will pan out)! :/

6
Guest Avatar
Phil 13th June, 2016 @ 07:44

Your strategy was always clearly more sensible that the 'portfolio' guys who have no respect for debt and what it really means. No other business owes what these guys do based on so little profit.....well maybe Littlewoods, BHS, Leeds United etc. Many see the monthly rent minus the mortgage as the debt and forget about the 30 mortgages and £5m debt.

A few years ago I watched a BBC program about a 'victim' who had bought a flat in Manchester following an investment presentation and they were going round the place with her. It was 4 years after purchase and clearly she had never been round it before. Buying houses like I buy tins of beans. For me, a signal to exit.

In a sea of nonsense I found your blog some almost immediately after watching that BBC program and it reminded me of the basics and a healthy fear of debt. I stemmed any expansion, recognised 3/4 houses outright was enough for anyone to survive and began to consolidate and save.

S24 is the thin end of the wedge. My hope is that it's aim is to stop borrowing and leveraging rather than 'landlording' (new word). But I expect the worst.

I get the unfairness and disparity - and as ever it's a super blog. However, I can see this changing for limited companies too. No deduction of mortgage interest for residential properties, no interest only never never mortgages and lending criteria based on income multiples not monthly calculations.

1) Yes. Was aware before this happened but like Benji thought the threat of it was to stem BTL.....never thought they would do it.

2) are you going to support/donate to the campaign? No....the tone is far too 'entitled'.

3) how is the legislation going to affect you? Makes me poorer and need to sell another - but will make me safer.

4) have you made any preparations for the change, or are you going to? Sold 2 of my already. Another to be sold this year and debt dropping to <15%.

7
Guest Avatar
Shaun 13th June, 2016 @ 09:36

I agree with Phil, this is the thin end of the wedge. They made a cynical calculation who they could rip off with the least howl of public outcry (who has sympathy for greedy plutocratic landlords?) and lost votes (the only thing a politician really cares about) and we became the targets.
Would not surprise me if the Gov do remove tax relief for all business borrowing as there are good economic arguments against it (though I will howl with outrage if they do!)

1/ Yes

2/ haven't decided yet

3/ 20% tax payer so no immediate effect

4/ As I foresee further attacks and already do all the things I can to keep my costs down the only thing left is to further reduce my mortgage exposure, a project that has been under way for a couple of years now but will be ramped up to give greater lee way in the future. My properties are pretty much at the market level for their location but will be keeping an eye on it.

8
Guest Avatar
Nicky 13th June, 2016 @ 13:50

1) Yes, had heard about it from a friend
2) I've given a small sum, yes
3) We may need to sell up; unlike many others we never set out to be landlords - we just couldn't sell our house in time to buy the new property so needed to rent it out instead. We don't actually gain financially from it at the moment - yes, the rent covers our interest-only ltb mortgage as well as the mortgage on our new home BUT if we had sold and then bought we wouldn't have a mortgage - our new home was considerably less than our now rented property was on the market for.
4) not yet....

Thank you for all the information you have on the website and blogs - as newbies to letting we couldn't have done it without you!

9
Guest Avatar
Stephen 13th June, 2016 @ 15:19

Hey Landlord, f u C k what Fred says above, I like your style of writing. It makes our business a little more fun. On to the serious business. I would like to cut off Osbourn's head and s h I t

down his f u C k I n g neck. He is a public schoolboy c u n t and I can only assume that he was butt f u C k e d by a gaggle of hairy a r s e d landlords when he as 12 to account for the stance he is taking.

Like most landlords, I have poured every penny I have into my 9 properties to see me into retirement - about 5 years to go. I have no desire to ponce off the government and would like to fund my own retirement. But f u c k it, if Osbourne is allowed to get away with what he is doing, I would rather burn the f u c k I n g lot and claim benefits. It appears that what ever you do to drag yourself out of poverty ( which I did by hard work) there is some c u n t in government that wants to put you back down there. Cheers and keep up the good blog. Steve

10
Guest Avatar
Emma Lou 13th June, 2016 @ 15:25

1 yes I was aware of the new taxation.
2 I shall give a small sum
3 most importantly, the new legislation will take me from paying very little tax as a 20% taxpayer, I only work a few hours per week, in a low paid job, alongside my portfolio, into being a higher rate tax payer. HMRC will work out out which tax bracelet you will be in by calculating your total income from rent, then removing allowable deductions (repairs, letting agent fees etc). Only then, will they allow interest relief at 20% on interest payments.

I am worried about how many people think they will not be affected because they are 20% taxpayers, they maybe now, but will not be using the new calculations.

4 I am waiting for the nod from my accountant as to which way is best (maybe inorporation ?) I am also holding off from buying anymore properties for now as I need to tweak my long term plans. I have remortgaged, to make sure I have got rid of any 80% LTV properties, and I am debating whether to pay lump sums off some off them ?

Overall, I am very concerned about future tax changes, as they will hit very hard, and I have invested blood, sweat and lots of tears, building up my portfolio, over the last 4 years.

11
Guest Avatar
Paul 13th June, 2016 @ 16:46

There are many very naive LL out there that even if they don't know about C24 will be affected
Once you reach £100000 of turnover you will start to lose personal tax allowance
C24 has the very easy potential to bankrupt many LL
Every LL should contribute to the JR.
There is no entitlement as one of the idiot posters suggested as a reason they weren't contributing.
This is a change in taxation policy that has been the same for about 220 years
ONLY mortgaged sole trader LL are to be affected by this iniquitous C24 tax legislation.
Other cost burdens on LL can be accepted , but NOT a fundamental change to tax policy.
You simply CANNOT plan for such a change.
Any business for hundreds of years has been able to offset finance costs against income before tax is assessed on the profit.
NO business should be charged tax on turnover
ONLY certain LL will be very soon in the whole of the UK!!!

12
Guest Avatar
Genesis 14th June, 2016 @ 08:50

1) Were you aware of the new tax legislation?

Yeah unfortunately I was aware of the new tax legislation. I don't like hearing about bad news, especially the kind that effects how little I will have left to spend on sipping Blue Hawaiians by the pool!

2) are you going to support/donate to the campaign?

Yes

3) how is the legislation going to affect you?

Wife is an accountant, so this affects me in two ways, no make that three ways. First I now have to have the most laborious talks about tax laws and money that makes a grown man want to wither and cry. Second this will push her into the 40% tax bracket and thus pay more, I believe thats how tax works. Thirdly she now has to work harder to make every penny count! Which in turn makes my life harder which feeds back to the first point. Its like a never ending cycle of misery!

4) have you made any preparations for the change, or are you going to? I know of a few landlords that are currently scaling back their portfolio, and taking advantage of the insanely high property prices!

Right thats it i'm scaling back my one property! No not really, I have a reasonable deposit in the house currently, whilst renovating the one i'm currently living in, looking to add value of around £40-50k minimum really. Im happy to play the slow long game with this, and the next property will only come once I have reached another high deposit. Till then I will just wait and see. I've just started so got a long way to go yet, and your right there will be many changes still to come.

13
Guest Avatar
aphrodisia 14th June, 2016 @ 08:53

Im surprised the majority of people haven't cottoned on to what the toerags are up to, I personally saw the writing on the wall when they introduced the council registration fee that came into effect last April. They are trying to drive small landlords out of the business and leave the industry free for their corporate cronies, that's what they are up to.
They will keep turning the screws on the small landlord until it will become just too much hassle for the "accidental" landlord to stay in business.

14
The Landlord Avatar
The Landlord 15th June, 2016 @ 11:38

@Phil
"No respect for debt" Good way to put it.

Fortunately, it's not as easy to buy houses like tins of bean anymore. I suspect that those that did (when the opportunity was available), will be the one's worrying most now, because they have virtually zero equity. Many of them put down 0-10% deposits, continued to release equity, and carried on buying... incredibly risky when you have such little control over the market.

"3/4 outright is enough"... agreed!

I personally don't see it happening to limited companies. At least, not while the Tories are pulling the strings.

Thanks for the comment.

15
The Landlord Avatar
The Landlord 15th June, 2016 @ 11:44

@Shaun
Ha, definitely agree - landlords being easy targets because it was given that no one would have sympathy for us. We're on the same par as parking ticket inspectors and estate agents! How many people would actually care if estate agents were taxed more while property prices were so insanely high?

That's why I'm reluctant to be confident about the clause being overturned.

16
The Landlord Avatar
The Landlord 15th June, 2016 @ 11:47

@Nicky
Thanks Nicky, appreciate it.

My advice is, make a decision based on what will make your life most comfortable.

Good luck! :)

17
The Landlord Avatar
The Landlord 15th June, 2016 @ 11:59

@Stephen
Haha, I feel your frustration. I've never been a fan of Osbourne, he comes across as so utterly unlikable. Smug little tit.

The Government are owned by big corporate companies, that's why they keep getting richer, and everyone else is getting crushed! It's a joke.

Anyways, hope you manage to keep your portfolio alive and healthy!

18
The Landlord Avatar
The Landlord 15th June, 2016 @ 12:09

@Emma
Yeah, I agree, I don't think many people realise that they will be affected. An even bigger problem is that most landlords don't even know about the legislation! Scary!

Definitely wait to see what your accountant says and then make a plan. Going limited is an option, but it comes with so much more work, which is something to bear in mind. If you haven't done so already, might be worth reading that article I linked to on the ThisIsMoney website.

Also, the tax rates on dividends recently changed, which makes it less appealing.

In my opinion, the best thing to do is just reduce the overall debt and look at better mortgage deals that offer better rates.

Thanks for the comment, and goodluck!

19
The Landlord Avatar
The Landlord 15th June, 2016 @ 12:13

@Paul,
If the C24 comes into play, I'm also confident many landlords will sink, especially those that bought so much, but own so little.

While I agree it's difficult to plan for a fundamental change to a tax policy, I think it is possible to adapt and make it work... or at least survive.

"NO business should be charged tax on turnover" - agreed. But the problem is, the Government clearly don't see BTL as a "business", which is baffling!

Thanks for the comment.

20
The Landlord Avatar
The Landlord 15th June, 2016 @ 12:15

@Genesis
Wife accountant, good equity, and playing the slow game... you'll be fine!

21
The Landlord Avatar
The Landlord 15th June, 2016 @ 12:18

@aphrodisia
See, I can't work out if they're doing this to appease the corporates or whether they're trying to push landlords out of business so there's a massive influx of properties back on the market, to help with the housing shortage/prices.

Whatever they're trying to achieve, it's the wrong way to go about it, that's for sure.

22
Guest Avatar
Dan 6th July, 2016 @ 17:50

I've been fortunate enough to get mortgage free by 35. I've remortgaged my property and taken another mortgage to buy a second property.

All in around £125k on 2 mortgages over 2 properties.

Rental income will be £450 which nearly covers both mortgages (rental expenses aside)

I'm estimating I'll have an income from rent and my self employed job of around £25k. After expenses I'm well off the 40% tax bracket.

So this tenant tax certainly seems aimed at people who are landlords exclusively as their job. Crazy for the government to single out 1 job role for extra tax.

Current plan is to massively over pay the mortgage on our new home. Get it mortgage free in 5 years. It's in need of renovation costing £102k plus fees and the bullshit 2nd home tax. All in it should cost £125k and be worth £140k so a tidy 15k in equity if I need to sell before the 5 years.

I'm technically a landlord I suppose but just an amateur one.

I've been looking at your blog when I can. Thanks for the info and help!

23
Guest Avatar
Paul 7th July, 2016 @ 06:55

What do you mean you are technically a LL!?
If you let out property you ARE a LL
No technicality about it.!
As such you are liable for many things
If you fail to comply you could end up in prison, so hardly technical!!
Have you used a spreadsheet to determine your actually position
Your mortgage interest will be counted as income
Are you aware of this!?
Many LL think they won't be pushed into HRT territory because they fail to understand how C24 works.
You need to ensure that your turnover less the personal tax allowance is below the HRT.
If not you will be a HR Taxpayer!
C24 affects every LL differently which is why you should complete the property118 spreadsheet
Then you will see your true actual position
Many LL are in for a shoch when they kise child tax credits etc because their mortgage devtvinterest has artificially boosted their gross income
Most sole trade LL haven't got a clue what is about to happen to them
That is their fsukt for failing to keep abreast if issues in the PRS
Wait to the tax man takes more if their income than they make in profit
But by then it will be too late
Many LL will he bankrupted by C24
Ll need to get with the programme and find out how C24 may affect then

24
Guest Avatar
Stephen 7th July, 2016 @ 08:07

I lament got this country. The dozy old English take all the s h I t that is thrown at them and complain in their pubs and clubs and do f u C k all. We need positive action like marching on Downing st. 30,000 LL out side that C u n t Osbourn's front door should focus his slimy public school boy deranged mind.

On the subject of Osbourne, where is he. During the vote the C u n t was nowhere to be found. I know where he was. He was in a darkened room with a box of tissues reading Femail Landlords Review try to think up more ways to smash private landlords into the ground to enable corporate landlords to pick up the residue.

Oh don't think he was knocking one out over a picture of Maggie Thature ( hence the tissues) no, the tissues were to dry his eyes from laughing his bollocks off when he devised another tax imposition on private landlords. Whilst the country was in chaos over Breixit he had used 4 boxes of tissues - the C u n t.

Anyway, how does one organise a protect march. Any ideas?

Regards

Osbourn's nemeses

25
Guest Avatar
Paul 9th July, 2016 @ 00:57

I believe EVERY LL agrees with your sentiments
However the idea that a march of LL will do anything apart from raise much hilarity amongst LL haters is delusional
A parade of LL will give a great opportunity to the nutty lefties to come out in force to assault such a march
Nobody wishes to be publicly associated with supporting LL irrespective of how much we are currently needed
Osborne will be gone very soon
Possibly off to the FO where he can't do anymore damage to the UK economy; but even better off to the backbenches!!
All we can do is lobby from behind the scenes and contribute to the JR fighting fund and the marketing fund.
We are probably the most needed yet despised profession in the UK and that is saying something when you consider our competition, politicians, estate agents, prostitutes etc!!!
The idea that the tenant public will in anyway support LL against C 24 is for Alice in Wonderland!
Even though it is in their best interests that they seek to overturn C 24.
There are vast numbers of LL that don't even know they are to be hit by this weird turnover tax.
So we have only ourselves to try and lobby against C24
But when you consider that only 1150 LL have pledged to contribute to the JR fighting fund that just shows you the level of LL apathy
There are reckoned to be about 450000 mortgaged sole trader LL who wil be affected by C 24
So why haven't all of them contributed to the C24 JR fighting fund!!?????

That should show you what we are up against!!

26
Guest Avatar
Jane 15th September, 2016 @ 22:35

The combat to the ridiculous tax changes is going to Limited company to purchase your buy-to-let. You'll figure out the buying through a company has more benefit than tax savings, especially for those who are looking at building a portfolio of property, investing as a group of friends or even transferring your property to your children.

27
Guest Avatar
Paul 16th September, 2016 @ 04:24

For any new LL it makes financial sense to do as you suggest.
That is start a company to invest with.
Any LL who is mortgaged as a sole trader faces financial destruction.
It makes NO economic sense to invest as an individual with the onset of S24.
Unfortunately for those LL that can;t escape to a company situation we are stuffed.
The only option we have is to increase rents to pay for the additional tax.
This will hit TENANTS hard.
Many LL I am aware of are selling up; deleveraging,reducing stock to unencumbered properties.
Mostly these properties are being sold to homeowners who are NOT currently tenants.
This means there will be vast numbers of homeless tenants who will not find a tenancy amongst the substantially reduced number of rental properties.
Never was there such a bonkers tax policy invented.
Perhaps the window tax is up there with it!!
Most sole trader LL could sel up and manage; but leaving hundreds of thousands of home less tenants.

28
Guest Avatar
Stephen 16th September, 2016 @ 09:09

Let's face it, the UK is f u c k e d in a plethora of ways and most importantly, financially. The government and the banks are deeply in love with each other - they have to be to prop each other up when their greed and incompetence f u c k themselves up.

So this legislation will not be withdrawn - they need to rape and steal every penny from anyone who has tried to make a go of making a living. Private landlords are going to be driven into the ground whilst the government and their lovers ( the banks) gorge on the fruits of our loss.

I have nine mortgages- all interest only so I am f u c k e d financially. I have done my sums and it does not work anymore. So that's it, I'm selling the lot. I agree with Paul above that there will be homeless people becaus no one will be able to afford the rents. I hope I see retribution heaped upon the UK government by the British public when there is a massive rental shortage.

29
Guest Avatar
Paul 16th September, 2016 @ 09:20

@Stephen
Most disappointing that your consider all your efforts have come to nought.
Would it be possible to hopefully use some of any sale profits you have to reduce mortgage debt and keep a couple of your properties.
I appreciate the CGT is a killer.
So the way to hang on for at least some hoped for future capital gain might be worth it.
Look up the rental properties as shared.
You hope they increase in value.
Hopefully you might be able to retain a few of your rental properties and reduce the debt.
Also try and remortgage on very long term tracker deals where you wouldn't need to ever remortgage.
This is because of the soon to be ever more PRA stringent requirents.
It would be a real Shane for you to be knocked out of the PRS completely when you have worked so hard to provide decent rental accommodation.
So think long and hard before you sell everything.
Try and hang to some of your properties
If you are married you could always officially separate and have 2 PPR
Just you wouldn't spend much time at tours and night visit the estranged wife quite often.
No S24 tax on a PPR with lodgers!!!

30
Guest Avatar
Shaun 16th September, 2016 @ 09:22

Paul,
sadly you are spot on, the ultimate loser will be tenants but that will not affect Tory politicos as they don't vote Tory! So win-win they get to look like they are "doing something" about homelessness and housing while their property company shares soar on the back of it!

31
Guest Avatar
Phil 16th September, 2016 @ 18:05

It me the 'Idiot poster' who mentioned 'entitlement' back again.
For me this was a tax on debt not rent. Like the Landlord I used debt (still do) but always assumed it needed paying back - like other small business do.

So I am planning for removal of interest only mortgages, removal of tax relief completely (despite 220 years of precedent), national insurance on rent, tax relief removal on ltd companies invested is residential and Basel III to restrict new lending.
Like the Landlord I am planning for 'what if Sh1t happens'.
Leaves with with enough and if position worsens I sell more.

32
Guest Avatar
Benji 17th September, 2016 @ 16:26

For me this was a tax on debt not rent.

It is both (unless you introduce rent controls at the same time -which even Osborne wasn't bat shit crazy enough to do).

Or are you claiming affected landlords will just suck it up and won't increase rents and that unaffected landlords won't jump on the bandwagon?

33
The Landlord Avatar
The Landlord 10th October, 2016 @ 09:49

Update: Looks like the campaign to challenge the tax change was unsuccessful: http://www.propertywire.com/news/europe/landlords-uk-denied-legal-right-challenge-buy-let-tax-change/

Now... if you haven't done so already... prepare! The tax changes seem imminent at this point.

34
Guest Avatar
Stella 10th October, 2016 @ 12:20

OK fellow landlords you know what to do. Spend, spend, spend on all your rental properties... give your tenants gold-plated windowsills and all if they ask for them ... stick it all down as repairs and maintenance and then the tax man won't get a penny! But in all fairnes he will get his fair share when you eventually sell and make a profit - so everybody wins. Tenant gets nice house to live in... landlord's rental property goes up in value... potential buyer gets a great house... tax man gets his fair share too. In theory it should work!

35
Guest Avatar
Paul 10th October, 2016 @ 13:35

Trouble is you can only replace gold window sills a few times before HMRC wise up!!
Just a shame improvement costs can't be offset
OK we would have no rental income as such though our properties would be veritable palaces.
Anything rather than give the income to Govt via S24!

36
Guest Avatar
andrewa 23rd November, 2016 @ 18:17

How does UK law handle it if the property is put in a blind trust / normal trust / beneficial trust? At least in terms of being able to claim mortgage interest as a cost of business. Anyone?

37
Guest Avatar
andrewa 3rd December, 2016 @ 12:02

Another point landlord, It was pointed out to me recently that in Scotland there is no structural difference between a cow barn and a hay barn. The difference is that one does not need planning permission for a hay barn but it is a requirement for a cow barn. Consequently cow barns have only been erected at government institutions since the necessity for planning permission came in and there are thousands of Scottish cows accommodated in hay barns. Would it not be possible to legally by contract with the tenant convert one type of rental accommodation (like BTL) into another (like a "self catering hotel suite") thus avoiding BTL tax (hotels AND b&b'S don’t Pay tax on their mortgage interest) this would also convert the non payment of rent into "bilking" which is a criminal offence prosecuted by the local constabulary as well as allowing for the criminal prosecution of those pulling a "Keith Moon" as vandalism.

Any thoughts from other followers of this blog?

38
Guest Avatar
Simon Pambin 3rd December, 2016 @ 15:39

Nice try, but they've got it covered: there's a pattern of occupation condition on Furnished Holiday Lets. In any one year, if the sum of all lets over 31 days adds up to more than 155 days, then it's not a FHL.

https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet

39
Guest Avatar
andrewa 9th December, 2016 @ 23:46

@Simon
If not a FHL then perhaps some sort of residential hotel?

40
Guest Avatar
Phil 10th December, 2016 @ 08:59

Furnished Holiday Lets explosion around our town. But despite this being a tourist area and business conference centre the competition will hit profits.

For me, a nay sayer C24 was always simple....a debt reduction program and reasonably quickly.

The political strategy is simple, they want to keep rates down for business but don't want 2m LLs owning 10 houses each (that's around 90% of all houses!!) so they have stemmed the growth in BTL.

I definitely won't become limited...thats a whole different set of rules and objectives.
Think seriously about your timeline, your objectives and an exit strategy. I have 9 properties left so if I sell them as they become empty that could still take 20 years particularly when mitigating CGT. I will be almost 70 then....and the last thing I want at that age is property. Just cash and a simple set up.

No ideal how the plan works or what the end game was for those with massive interest only debts and 20 houses. Leave 20 boilers, 20 tenants, 20 leases and 20 mortgages to the kids....I bet they will be happy trying to unstitched that muddle.

The key here was by not being a limited company you could become relatively wealthy with a modest strategy.

Over the past 20 year, starting at 30 years old I have bought sold many houses a few years after renting them to lock in renovation gains and keep debt down. Who wants lots of houses and debt? Just a good relative income from 3/4 debt free houses surely.

C24 really has thrown my timeline but it it will encourage debt reduction and that's a good thing for me. When rates rise people will wonder why anyone would every have invested in property unless it gives a good 10% yield or you want it to live in. Still amazed me the prices some have paid for houses over the past few years to then let out. Bad research and bad contingency planning.

41
Guest Avatar
Simon Pambin 10th December, 2016 @ 13:36

@Andrewa

Well, if you fancy making breakfast for your tenants every day, that might work (if you don't mind the extra costs of complying with the regulations for hoteliers). If you're not providing catering, then it's self-catering accommodation and you're right back at the FHL pattern of occupation test.

42

Please leave a comment...

Nobody

Nobody

Landlord

Landlord

Tenant

Tenant

Agent

Agent

Legal

Legal

Buyer

Buyer

Developer

Developer

Enthusiast

Enthusiast