Stamp duty and buy to let tax changes: Readers' views...

From: Shelley Wills

I have recently begun to invest in the Buy to Let market and am focusing on the area I live which is one of the most deprived areas in the country.

My philosophy is that I want to upgrade the properties I buy to generally improve the area and because I live here, and I want to look after my tenants well. I have to earn a living and the margins are not that great.

The extra stamp duty on any future purchase will completely wipe out the budget for refurbishment which will adversely affect the quality of life for the tenant and the general regeneration of the area. A very short sighted move by the Chancellor!

From: Lou Valdini

I am 61, and started as an 'accidental' landlord when I bought a larger home with my partner, and we both rented out our previous homes. We then bought 2 BTL apartments which we hoped would help fund our retirement (because neither of us will have a public sector pension).

My property in London has been profitable because I was part Freeholder and a Director of our own management company, and I had very good tenants. However, we have actually lost money on the other 2 properties due to rental voids between lets, non-payment and vandalism by 'rogue' tenants, management and legal fees, repairs due to poor construction, and spurious service charges by the landlords and their agents ...so much for those who talk of landlords providing squalid, high rent accommodation, with a license to print money!

Following the recent ill-conceived government changes, I decided to sell up in London, but far from the apartment going to a first time buyer or young family, or back to the rental sector, it was bought by a retired couple who had downsized and wanted a London pad as their second home. As for my equity from my London property, I will not be reinvesting in the rental sector, and I believe my situation will be repeated wholesale. I would rather invest in a classic sports car!

We would love to sell our other properties. When the 'double whammy' of tax changes and future interest rate rises start to bite, we will be in dire straits. Our rental income will push us into the higher tax bracket, on which we will be taxed, but we will not actually have that income because most of it will have already been paid out in mortgage interest; a normal business expense for a Ltd company. This is fiscal nonsense!

How can it be right that a Ltd company (and very strangely, those who buy properties for holiday letting) are permitted to buy rental properties with mortgages, and be allowed to claim the mortgage interest payments against tax, but it is not permitted for a private landlord to do the same?

I grew up in a working class family, where voting Labour was never even questioned. When I had a family of my own, and aspired to more than my parents had 'settled for', I voted Conservative ever since, because I thought they were the party for aspirational Britain. This past 6 months has shown just how wrong I am!

This government has attacked small business entrepreneurs and landlords, both of which impact me. I guess they are hoping we will simply get used to it before the next election. Wrong!

I will not vote Conservative again, and there isn't another party worth voting for, so my vote will be wasted if there isn't a party that looks after my interests.

Can David Cameron provide an answer to this?

From: Julian Bishop

What will the government do if, and more likely when, rents are increased, likely above future inflation and salary increases, to cover the deficit in income the new regulations will create for current Landlords with BTL mortgages?

If this does occur how are first time buyers expected to save to buy a new home?

Also, who did the Govt consult before going ahead with the new tax and SDLT changes?

From: Paul Davey

Why are institutional investors not being penalised for being 'landlords'? Why is the government targeting small/individual businesses? One of the things the Conservative party is supposed to promote...

From: Property Wizard

The majority of our clients are small investors with 1-3 properties. Without these small investors the Battersea and Wandsworth areas would be experiencing a massive shortage in rental stock, and why should larger organisations get exemption from this tax, when the smaller investor most likely has a smaller margin which will be further cut when tax relief on mortgages is taken away!

This all just sets the stage to further increase rents to recover the losses.

From: Paul Robinson

With the announcement of 130,000 new houses being built under Mr Cameron's hand the consultation period will be over before their is anything firmly in place for these houses.

But I bet this piece of unfounded future legislation will be part of the PM's arguments to any critic of this new penalising stamp duty on those who can least afford it. I suggest that whoever talks to him at his clinic they are ready with a very good and constructive response and let him know in no uncertain terms should this be an answer to a future (perhaps) shortage of rented properties in the private sector.

The government just can not build this many houses in the short term or even in the mid term as this government will be gone by then and who knows what will happen to all these lovely new homes promises. I think that Boris Johnson has a similar dream but a very limited uptake but I can't remember the nuts and bolts of that one so can anyone enlighten us?

From: Keith Pattinson

Conservatives used to see strength of entrepreneurials/individuals/small business people.

Now they are targeting them in favour of corporates,who will be foreign owned/non-taxpaying.

The measures are obviously discriminatory,but individuals only get one vote every five years,then live under a dictatorship of politicians who have normally only been salaried/taken no risks.

Moving the goal posts so obviously is unfair,and while they say landlords are profit-seeking ogres to be driven out,they have to deal with a range of tenants that include some who destroy properties that owners cherished.Will the Chinese end up owning all our houses,as well as everything else.
e.g.The Government at a time of no inflation,tied us into a nuclear power plant deal with the Chinese giving us the liability for a 100% increase by 2015.

It is easy to landlord bash,but tenants have choices in the private sector,why does the Government not build council houses again,instead of destroying a significant industry that caters for those who choose to rent.

From: Angus Bearns

The Government proposals are a betrayal of Tory principles and an attack on the hundreds of thousands of decent landlords.

Private landlords are great for Britain. They buy dilapidated property, pour £millions into refurbishment, and fill it with uncountable people who need a home. Why attack them?

The craven pandering to the super-rich (exemptions for institutional investors) is disgusting. It is like the corrupt sale of the Royal Mail to George Osborn's mates. The rich get richer, the ordinary landlord gets stuffed.

Thirdly, property investment is a pension. The more Cameron destroys our hopes of providing for our own old age, the more he inflates the state - something I thought the Tories were against.

Fourthly - and obvious enough - landlords have nothing to do with the housing shortage.

The supply weakness is the fault of successive governments, who couldn't organise a drinking session in a brewery. (I remember the Barker review...) The demand problem is, wait for it, down to successive governments' pitiful inability to control immigration and to 'rebalance' the economy away from London. It is nothing whatever to do with landlords. A hundred years ago, ninety percent of housing stock was private rented. To kick the private landlord is to take advantage of an unsympathetic target - what we call bullying. It stinks ethically, economically, and politically.

Finally, far superior options are available. For unoccupied homes, Council Tax could double every six months. For homes used no more than three months of the year, Council Tax could double on a rolling basis. Those measures would make a real difference to the supply side, and put some money back where it counts, with local councillors.

We also need to end the scams: help to buy and shared ownership. These are devices to enrich developers which inflate the housing market. Exactly the kind of short-termism that damages the economy.

All in all, this is a very nasty piece of legislation from a very nasty government that has got everyone baffled.

From: Julia Simmons

For some of us Buy to Let is a business, i own 40 properties, i employ 15 people full time, i employ estate agents and numerous other trades so i am putting a lot of money back into the economy, however this is not classed as a business, how is it not a business.

This is the only business where the loans you take out is not going to be deducted from the profits, so i will be making huge pretend prfits which i am expected to pay tax on but Facebook which makes billions pays a very small amount.

This government has let down the small person and its all about the big institutions for them, my vote counts for nothing as i am not in the commons loybbing very loudly to be heard and taking all the MPs out for expensive dinners,

I simply cannot afford to run this business and will be selling everything and leaving the country as i have no choice and all the people i employ will lose their jobs.

Job badly done Prime minister.

From: Property Mastermind

Having read the consultation paper, I would like to share the following feedback with you, which I hope will refine the policy to demonstrate better equality among those affected by the changes:

I note that those who own a rental property, but not their main residence, will be liable for the extra tax. There is an exemption for existing buy-to-let owners who own a main residence and at present, this does not extend to landlords who do not own their main residence.

This puts myself and many of my peers at a disadvantage as I own a property which I rent out and I live with my parents. Should I wish to buy a property to live in as my main residence than I end up paying the higher stamp duty land tax charges. This is in stark contrast to somebody who currently has a rental property and a main residence, who then then buys an additional property to live in. In this instance, this party is exempt from the charges.

The forthcoming changes should apply equally to everybody and I believe this exemption from the charges should apply to landlords who do not own their main residence.

From: Andrew TT TT

Please can you ask for a justification as to why smaller landlords are being disadvantaged against corporate landlords/institutions?

If the action of being a landlord is to be taxed more harshly, I can get my head around this. I may not like it, but no one likes their tax bill to be increased. What I can not abide is the idea that this policy is targeting small landlords to advantage large businesses.

From: Simon Shinerock

It is my contention that the decision to tax private individuals on turnover rather than profit and to charge them an extra 3% stamp duty while leaving institutions alone is unfair, politically motivated, misguided and fundamentally flawed. I believe these changes attack the values of our society and undermines personal ambition and aspiration, an obvious irony coming from a Conservative Government committed to upholding these same values. Can you explain why these changes are being made?

If this stamp duty change goes through and many private landlords exit the sector rents will go up as institutions have less competition. How does this help tenants?

There is an assumption that everyone wants to buy to live, this is untrue. Many now separate there living arrangements from their investments, choosing to rent for flexibility and mobility and invest for Income and capital growth. This approach has been good for the economy and the country making our workforce more agile than our competitors. Do you not agree this edge will be blunted by these changes?

Instead of these changes why not solve the housing crisis properly and start with a process of open honest dialogue around the problem. This will give those who support the preferential treatment of institutions in the buy to let sector the chance to have their say without hiding behind an obvious campaign of disinformation. The government should not make it seem as if the private landlords are the problem when they are not. Do you not believe an open consultation on this matter would be a welcome thing?

From: Ben Gosling

It's quite clear that neither measure (I don't count the revocation of the wear and tear allowance alongside the stamp duty surcharge or finance cost relief restriction) is intended to adversely affect institutional investors, and the government has made no secret that it wishes to encourage this type of investment. Since the publication of the Montague Report in 2012, the government has been overly concerned with how best to encourage institutional investment.

Evidently the Treasury and DCLG are convinced that large-scale build-to-let schemes are the way to solve the housing crisis. But to be attractive to institutional investors, the returns from this type of investment need to be predictably high. So either rental returns need to be high (meaning prohibitive rents), property prices need to keep rising, or both.

This is why I don't believe the rhetoric of helping first-time buyers. The government and the Bank of England are doing everything in their power to prevent house prices from falling – in other words, becoming affordable. This includes deterring highly-geared investment from private individuals (by restricting buy to let mortgage interest relief) and, potentially, preventing lenders from issuing high-LTV or low-DSCR loans by enabling the Financial Policy Committee to intervene in the sector.

So what is the motive? Are the government hoping for an exodus of private investors, enabling institutions to snap up the leftover properties on the cheap? Risky, as if house prices fall, they will take the economy with them; owner-occupiers will become less wealthy in relative terms, consumer spending will fall and credit loss rates will rise. (Does this sound familiar?)

More likely is that the government hopes to maintain the current status quo vis a vis prices whilst affecting a transition from a privately driven to institutionally driven sector. Thus, large landlords are encouraged to incorporate, whilst small landlords are penalised and encouraged to sell, probably at a loss.

In an ideal world, the housing market would offer affordable and flexible accommodation across all tenures, provided by a mixture of private, institutional and social investment. But several decades of gross mismanagement of the nation's housing have, sadly, made this extremely difficult to provide.

From: Algarve Investor

“In an ideal world, the housing market would offer affordable and flexible accommodation across all tenures, provided by a mixture of private, institutional and social investment. But several decades of gross mismanagement of the nation's housing have, sadly, made this extremely difficult to provide.”

You've hit the nail on the head here. Well said.

Until there is widespread changes to the housing market, this is all just gimmicky nonsense and tinkering around the edges. Successive governments have failed, for decades, to address the serious issues with housing in this country. And it looks like it's going to take another few decades - or a massive property crash in the next few years - for the government to wake up and take some decisive action.

From: Appalled Landlord

On 29 April 2015 David Cameron PM pledged that if the Conservatives were elected there would be no increase in income tax in the forthcoming parliament, full stop. He asked us to trust him, and warned us not to trust the other parties who had secret plans to increase it.

Ten weeks later, on 8 July, George Osborne announced that he would increase income tax from 2017 for landlords who bought properties in their own name (but not for those who bought through companies) by disallowing mortgage interest.

From: Rob D

Julia Simmons (see above) has it bang on when she says ''This is the only business where the loans you take out is not going to be deducted from the profits, so i will be making huge pretend profits which i am expected to pay tax on but Facebook which makes billions pays a very small amount.''

THIS is the real issue!

PRIVATE Landlord's - who in the main do an excellent job will be penalised with large corporate bodies will escape all of these penalties.

From: David Porter

I may be stating the obvious here, but this so-called [SDLT] consultation process is evidently nothing more than a sham. Annex B of the consultation document lists seven code of practice consultation criteria, none of which this consultation actually meets. For example, "Consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible." This one only lasts five weeks.

Annex B also says, "If you feel that this consultation does not fulfil these criteria, please contact..." and then provides a broken email address link. So the only way to voice any concerns over the consultation process is to write a real letter, which means your concerns are unlikely to be heard, due to the short timescales involved and Royal Mail's preference for losing letters rather than delivering them.

Given the impact these proposals will have on the housing market, it would be nice if the government could at least abide by its own code of practice for consultations. It's obviously just a paper exercise to make it look like stakeholders are being consulted, but government doesn't care about our views, and doesn't care that we know it.

Otherwise there would be a proper consultation, in accordance with the code of practice - at least then they could PRETEND they cared!

From: Dean Sands

The main difficulty i have that we are being told that we need more houses, that more people want to rent but we small landlords are making too much money so need to be taxed more heavily then any other business sector who are allowed to offset loans against profits.

But what does Cameron think big institutional investors will do, they will not care if someone loses their job, if they can't pay this months rent, that their mother dies and that they are mess and can they pay their rent late.

I own 30 properties and i treat my tenants as human beings, i know all their names and when they call up with queries we have a friendly chat. I employ 10 people plus all the extras who i will also have to get rid of because i will not be making any money.