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With just 3 weeks to go, our latest poll shows that 70% of landlords are still unaware of tax changes set to come in via Section 24 aka 'The Tenant Tax'.
Over the last 3 months we have undertaken a poll of 1,000 new landlord members who’ve joined us, to find out what they know about Section 24 of the Finance Bill 2015-16. Worryingly, 70% 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 4 years.
Announced in the Summer Budget of 2015, from 6th April 2017 the amount of Income Tax relief landlords can get on residential property finance costs will be restricted to the basic rate of tax.
According to recent figures this means that approximately 8.2 million people in England alone will be affected.
The changes will:
Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief will be available for capital repayments of a mortgage or loan.
Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.
Landlords will be able to obtain relief as follows:
These looming changes are so extreme and far reaching that the government are forcing landlords into a situation in which they have no choice but to do one of two things:
NLCE UK Director Sam Jackson recently addressed the Housing Minister at a buy-to-let forum, attempting to draw Barwell's attention to the fact that Section 24 policy will bankrupt the buy to let industry and drastically increase homelessness across the country.
'I told him (Gavin Barwell MP) I’ve been a landlord for 12 years, I had bought poor housing and renovated it, I homed 55 people in 34 units and I haven't raised my rents in many years.
I told him in four years he will make me bankrupt.
I asked him what would happen to my tenants; I have put my portfolio up for sale and nobody is looking to buy it for residential. I explained the people who have shown interest are looking for yield and are looking to turn my houses into HMOs, displacing those families, and that with my flats they are looking at how much they can increase rent when they have bought from me.
I decided as I did not have long to speak just to give him a real life example of the carnage section 24 is going to cause.
He answered that the Chancellor George Osborne had bought in section 24 because he was warned by the banks that the buy to let market was creating a bubble that would burst, so they had to calm the buy to let market. He also said it was to 'level the playing field with homeowners', and that it does not affect many landlords (that old chestnut!!).
At that point I got back up without a microphone and asked him was one landlord and 55 people potentially made homeless not enough?
He answered that they have to look at the bigger picture. He did say it’s being phased in over four years and they will monitor its affect as it goes. So my only glimmer of hope is that all landlords make the tenants aware and publicise the rent increases and evictions due to section 24.'
if it is true that so many landlords are unaware of this, despite major media coverage, then they deserve everything they get
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