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AvoidDebt

1.4m landlords 'unaware of mortgage interest tax relief change'

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The campaign against the imminent changes to mortgage interest tax relief for the buy to let sector estimates that 1.4m landlords are still unaware of the proposals.

The Landlord Referencing website - which backs the so-called Axe The Tenant Tax campaign against the tax change contained in S24 of the Finance (No.2) Act 2015 - says that it has polled 1,000 of its members. 

“Worryingly, 70 per cent of those polled where oblivious to any such tax change at all – meaning that circa. 1.4 million landlords are unaware of the drastic effect it is going to have on their rental income and their tenancies over the next four years” claims the website.

It says that overall some 8.2m people in England alone will be affected, because they let residential property as an individual, or in a partnership or trust. 

The main campaign against the measure - which is phased, with part one coming into effect on April 1 - has the support of ARLA, the NLA and RLA, UKALA and the Scottish Association of Landlords. Last year the campaign lost a bid to trigger a judicial review of the measure, first announced in George Osborne’s post-election Budget of 2015.

https://www.lettingagenttoday.co.uk/breaking-news/2017/3/1-4m-landlords-unaware-of-mortgage-interest-tax-relief-change

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I've mentioned S24 to quite a few people who I know are deep in BTL and mortgaged to the hilt.

Every time I was given a confused and disparaging look and they couldn't answer or changed the subject.

I just laughed inside ?

BF

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13 minutes ago, BLOW FLY said:

I've mentioned S24 to quite a few people who I know are deep in BTL and mortgaged to the hilt.

Every time I was given a confused and disparaging look and they couldn't answer or changed the subject.

I just laughed inside ?

BF

Same. I've reluctantly explained S24 to 2 BTLers.  Annoyed with myself as it ruined the surprise.

One BTLer looked glazed and said it didn't affect them. 40k paye salary, plus £16200 annual rental income tells me it does. Whatever.

 

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1 minute ago, Starla said:

Same. I've reluctantly explained S24 to 2 BTLers.  Annoyed with myself as it ruined the surprise.

One BTLer looked glazed and said it didn't affect them. 40k paye salary, plus £16200 annual rental income tells me it does. Whatever.

 

That's the child benefit gone for starters :D

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39 minutes ago, AvoidDebt said:

The campaign against the imminent changes to mortgage interest tax relief for the buy to let sector estimates that 1.4m landlords are still unaware of the proposals.

Haha, good! B)

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For those that don't know and/or are living in willful ignorance, when will they be forced to notice it? (i.e. when will some start thinking "£%&$! I need to sell up!"?)

When they submit their tax return at the end of the year?

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11 minutes ago, R1ch said:

For those that don't know and/or are living in willful ignorance, when will they be forced to notice it? (i.e. when will some start thinking "£%&$! I need to sell up!"?)

When they submit their tax return at the end of the year?

True. I wonder if the above examples of the BTL's who weren't interested is due to them not being on the radar anyway so it wont make any difference and the HMRC is useless. It's not just about grassing up tax dodgers, homelessness has tripled since 2010.

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A few weekends ago I was in a pub early afternoon (as you do!) and got chatting to a couple of morons at the bar who were just itching to tell anyone who would listen that they were BTL 'investors'. Genius entrepreneurs if you like.

I asked them how they felt about all the changes coming into effect and they immediately told me that they weren't at all bothered because house prices only ever go up. It was very obvious that this was the first time they had heard of anything to do with S24.

Asked them how much debt they were in and they said none... quizzed them about mortgages and it turns out that they are debt free because they don't consider mortgages as debt!

 

Fingers crossed they are all like that.

 

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1 hour ago, AvoidDebt said:

“Worryingly, 70 per cent of those polled where oblivious to any such tax change at all – meaning that circa. 1.4 million landlords are unaware of the drastic effect it is going to have on their rental income and their tenancies over the next four years” claims the website.

Those in business tend to pay very close attention to anything which may affect their business.

Announced in Summer Budget 2015....  BTLers have always been speculator investors for me, not businesses.

They can take the brunt of whatever their personal impact is with S24, just as renters have had to do against raging HPI and specuvestor landlords.

On the other side of things I am certain there are many renters who have no idea about Section24.  

Still at viewings who have been buying since S24 announced in 2015 (something we at HPC have been all over... mostly very happy about).   They too make their own choices to buy.  

After all, we (real HPCers) have no certainty to what the actual impact of S24 will be, and whether it will prove a real measure to bring down house prices in very HPI affected areas down to any better measure of affordability vs incomes.

Pal sold his apartment (2008 purchased, deep in identical apartment land in the North West) in late 2015, to rent with his young family in suburbs.  I know he has a mind on buying a house, but for the moment he has found a nice rental for his young family, with garden, from a BTLer who has claims on quite a few properties.   It was young kids that drove the move out of the apartment into rental.  

Before he sold his own parents tried to convince him to keep the apartment to rent out.  They offered to put in £ and come in title, so he would still bank some money required for a deposit.  His parents (who are apparently 'what it is worth' house proud of their own house) had no idea of S24 either.  They were surprised to learn about SDLT surcharge which would be payable under their plan.      So the apartment sold to a buyer who wanted to buy it.   They wanted the apartment and buyer and seller agreed to transact at a price.  We're in a market.

3 minutes ago, bomberbrown said:

How many BTLs are declaring tax to HMRC in the first place?  That's what I'd like to know as that's how many it will actually affect.  

S24 changes everything about that.  

Many see HMRC as incapable about BTL, or secretly not that bothered, and the BTLers as a few steps ahead. 

There has been little need to chase too much on BTL side, up until S24.   Not that much taxation (overall) to chase up.

Under S24, and big changes to claims under wear-and-tear claims in Budget 2015 (something not discussed enough on HPC) the actual taxation worth chasing from BTLers zooms and zooms upwards from the current system.

So many landlords have arranged their financial affairs so that they make no profit.

Quote

 

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?

 

 

more https://www.property118.com/open-letter-george-freeman-mp-conservative/76353/

---

On 11/25/2016 at 1:01 PM, Phil321 said:

I think the first point here is really interesting too. I bet there are some people do not do a return knowing they make little or no profit. Of course that is wrong but in the scheme of things....probably happens. 

C24 takes this away - even for BR tax payers - because effectively the profit (before interest) needs to be declared in order to determine underlying income tax rates etc. And no one can say that they worked that out in their head....it's a declaration of earnings not a declaration of profit  

HMRC may not have been too bothered in the past this changes the reason for the tax return. Ie not to calculate necessarily tax due but to record actual incomes.

Mir maybe that person is unaffected in terms of tax - but having to do a return shifts the goalposts. (To where they already were....but shifts it for those who felt they could get away with easy life no tax returns pre C24). 

So let's see.

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Anecdotal; my EA in NW London - Still 90 percent of his Landlords on his books, don't know. His firm know and have been making arrangements for inevitable "Bad News.," and subsequent sales and commission.

What day do the changes officially come in? I want to watch the changes in BTL Landlord demeanor.

Plus the certain sob stories in the HPI infested papers.

Have a happy HPC.

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According to HMRC, only approx 500,000 declare rental income on tax returns so I doubt the 1.4 million unaware of tax relief changes either know or care...

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2 hours ago, BLOW FLY said:

I've mentioned S24 to quite a few people who I know are deep in BTL and mortgaged to the hilt.

Every time I was given a confused and disparaging look and they couldn't answer or changed the subject.

I just laughed inside ?

BF

They probably don't declare any rental income anyway.

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2 minutes ago, fru-gal said:

According to HMRC, only approx 500,000 declare rental income on tax returns so I doubt the 1.4 million unaware of tax relief changes either know or care...

Markets move at the margin.   Anything which brings more supply (houses) onto the market is welcome by me, meaning S24, and we will definitely have more BTLers looking to sell.

Only this morning I found an apartment my pal looked to rent, is now up for sale.    Although the buyer only bought it in 2015.   And sking a weighty £50K more than they bought it for, having put in a new sleek kitchen, so no major pressure on the downside, but it still give me some hope.  It's a start and things can change abruptly.   

And there is unusual pricing going on in my wider local area, despite low inventory.  Still ultra high asking prices (IMO) but there are lot of houses asking the same £asking price, to a few other houses up for sale on the very best roads!  WTH that about?   Who wants a house on really busy road, coming up to a big roundabout, vs a nice house on a nice quiet road, aside many other nice house, in a plush conservation area, with a better school catchment.   Not that I am ever going to be on that side of the market as a future buyer (houses in a plush conservation area), but just seeing the houses I might be able to afford, as being way overpriced vs better quality.

It's doesn't matter so much if some BTLers slip the net.

And HMRC have systems in place to follow the 'too smart landlords always ahead of HMRC' that some want to imagine the BTLers/LLs as being, going forward into S24.

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4 minutes ago, Venger said:

Markets move at the margin.   Anything which brings more supply (houses) onto the market is welcome by me, meaning S24, and we will definitely have more BTLers looking to sell.

Only this morning I found an apartment my pal looked to rent, is now up for sale.    Although the buyer only bought it in 2015.   And sking a weighty £50K more than they bought it for, having put in a new sleek kitchen, so no major pressure on the downside, but it still give me some hope.  It's a start and things can change abruptly.   

And there is unusual pricing going on in my wider local area, despite low inventory.  Still ultra high asking prices (IMO) but there are lot of houses asking the same £asking price, to a few other houses up for sale on the very best roads!  WTH that about?   Who wants a house on really busy road, coming up to a big roundabout, vs a nice house on a nice quiet road, aside many other nice house, in a plush conservation area, with a better school catchment.   Not that I am ever going to be on that side of the market as a future buyer (houses in a plush conservation area), but just seeing the houses I might be able to afford, as being way overpriced vs better quality.

It's doesn't matter so much if some BTLers slip the net.

And HMRC have systems in place to follow the 'too smart landlords always ahead of HMRC' that some want to imagine the BTLers/LLs as being, going forward into S24.

HPI Sentiment is so strong and so heavily embedded into the national psyche that everyone believes their shithole is worth more than they bought it for, even if they bought 6 months ago you will see £100-£200k added on (especially in London). It is like free fantasy money to them. 

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1 hour ago, fru-gal said:

According to HMRC, only approx 500,000 declare rental income on tax returns so I doubt the 1.4 million unaware of tax relief changes either know or care...

But as of 1 January, if they apply for a new mortgage they are likely to be held against new, tighter standards. 

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9 minutes ago, Ah-so said:

But as of 1 January, if they apply for a new mortgage they are likely to be held against new, tighter standards. 

1st of Jan just gone or January 2018?

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3 hours ago, CunningPlan said:

That's the child benefit gone for starters :D

I was thinking of the 10k of the rental income being pushed into the 40% tax band. I didn't consider the child benefit aspect. Nice!

2 hours ago, hotairmail said:

Because they don't declare their rental income?

In this case they do. This is the BTLer I've mentioned before on here that didn't pay tax on rental income and HMRC caught up with them 6 years later. They'd have to be seriously stupid to try and evade tax again. 

My BTler isn't immune to Section 24 and they're about to take the massive shaft. They don't think it will affect them because they are completely ignorant and financially illiterate. No other reason. 

Edited by Starla
Edited for extra info

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1 hour ago, fru-gal said:

According to HMRC, only approx 500,000 declare rental income on tax returns so I doubt the 1.4 million unaware of tax relief changes either know or care...

I'll just flag this because I think it's interesting. See how this 1.4 million number is now being accepted on this thread.

It's a bit moody IMO

There are about 2 million buy-to-let mortgages in the market, hence the Axe The Tenant tax morons want you to believe that this means there are 2 million leveraged landlords who will be affected by Section 24. Can you  see the problem with that line of thinking? It would be wrong if a significant number of individuals had more than one mortgage.

In 2014 Paragon put out an estimate of there being 2 million private landlords in the UK, though there is no indication how they got to that number (source). The leveraged landlords must be a subset of that two million.

Hence by two different measures that 2 million number - as the number of people potentially affected by Section 24 -  must be an exaggeration. If I was to bet my own money, I'd be stunned if the actual number was closer to 1.5m than it was to 1m.

Also your number declaring to HMRC seems way off too. This May 2016 Guardian piece has the number of individuals declaring income from property as 1.75m but the line "Figures from estate agent ludlowthompson based on data from HM Revenue & Customs" doesn't fill me with confidence so DYOR.

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