Section 24 | Finance Act 2015 | Axe The Tenant Tax | Mortgage Interest Relief on Buy To Let Property

– I started this YouTube
channel for two reasons, one, to help people who have an interest in property investing to either get started or
improve their business, and two, to promote the
high standard of homes that landlords and investors provide which you don’t get to see
in the mainstream media. This video, however, is gonna focus on some bad news, though. It’s hard enough when you
start out investing in property with all the obstacles
you have to overcome, and this is another
one of those obstacles. I don’t want to do this video. I’ve put it off for some time. But I know I’m actually
doing you a disservice if I don’t talk about and share
this information with you. So here it goes. Can we play some sad music and can you zoom in slowly
for a dramatic effect? (piano music) Currently, all landlords pay
tax on any profit they receive, and the amount of tax they pay would depend on their total income. George Osborne delivered a summer budget statement
to the House of Commons on Wednesday, the Eighth of July, 2015. It was the first conservative
budget in 18 years. In that statement, he announced
he was going to restrict the amount of tax relief landlords receive on their buy to let mortgages to the basic level of income tax. (blows raspberry) (record scratching) Stay with me, ’cause in
a minute I’ll explain what this means for both
landlords and tenants, why are we continuing business as normal, and what you can do to
help raise awareness to people who don’t understand
the full impact of this. (techno rock music) Hi, I’m Andy Walker from, where I blog online about my journey as a property investor and landlord, sharing what works for me and what doesn’t to help you start or improve
your property business. Now, let’s take a look at that part of George Osborne’s statement, and I’ll jump in and add
a couple of comments. – We will create a more
level playing field between those buying a home to let and those who are buying
a home to live in. Buy to let landlords have a
huge advantage in the market, as they can offset their
mortgage interest payments against their income,
whereas home buyers cannot. – That’s because a buy to let
property produces an income. It’s a business. A home doesn’t provide an income, so therefore it’s not a business, so no tax should be paid
or tax relief given. People are only taxed on income. Why? As a homeowner and investor myself, that all sounds perfectly
reasonable to me. I wouldn’t expect tax
relief on my home mortgage because I don’t pay tax for having it. Let’s move on. – And the better off the landlord, the more tax relief they get. For the wealthiest, every pound of mortgage
interest costs they incur, they got 45 p back from the taxpayer. – I don’t understand that statement. Can someone explain this to me? I don’t receive any
money from the taxpayer. Comments below. – All this has contributed to the rapid growth in
buy to let properties, which now account for
over 15% of new mortgages, something the Bank of
England warned us last week could pose a risk to
our financial stability. – Firstly, there’s been a growth in the private rented sector
because there’s been a demand. Previous governments have failed to ensure that there was enough housing
to cope with the demand, and the private rented sector
have picked up the slack. Secondly, how can this pose a risk to the country’s financial stability? Lenders loan against their asset once they’ve evaluated both
the asset and the borrower. If the borrower ever defaults, they potentially lose their
asset and their deposit. The lender gets their asset back and either keeps it or
sells it on at no loss because it was protected
by the borrower’s deposit. – So we will act, but we will act in a proportionate and gradual way, because I know the many hardworking people who’ve saved and invested in property depend on the rental income they get. So we will retain mortgage interest relief on residential property,
but we will now restrict it to the basic rate of income tax. And to help people
adjust, we will phase in the withdrawal of the higher rate reliefs over a four year period and only start withdrawal in April, 2017. – I like to keep my
videos friendly and clean because there may be some young
and aspiring entrepreneurs that watch this channel or parents with little
ones in the vicinity. So I’m gonna gag myself while I tell George what
I think about all this. (mumbling furiously) (exhales) That’s better. So Section 24 of the Finance Act 2015 is aimed at disallowing the perfectly legitimate finance costs of individuals who operate
buy to let properties. The government not only wishes to continue to tax rental profits, but
they will now not allow individual investors
to offset the main cost of arriving at that taxable profit. Every single business is allowed to offset their total running costs against their income before
being taxed on any profit. It’s a key factor to the generally accepted
accounting principle. And Section 24 changes that very fundamental and
important business principle. The tax that a landlord
would be expected to pay may be greater than their profit. It’s important to know that
this new tax legislation is only aimed at individuals
who own and operate buy to let properties in their own name and excludes institutions, corporations, wealthy cash buyers,
and overseas landlords. I just wanna quickly share
this interview with you on Property Tribes with Lisa Orme, who’s an investor, landlord,
and mortgage broker. – Nobody has a go at Tesco
for making a business out of a fundamental
need of providing food. Nobody has a go at H&M
or M&S or anybody else for providing a fundamental
need of clothing and making a business out of it. Why are we victimised as landlords and made to feel bad
about making a business of providing one of the other
needs, which is housing? We don’t take properties
away from home buyers. We provide decent homes. We renovate homes that often aren’t suitable for anybody to live in. And the fact is that, if you got rid of all landlords tomorrow, does that make all tenants home buyers? It just simply doesn’t. There are a lot of people who
want to rent, have to rent, or simply will never, ever be
in a position to buy a home, and it doesn’t matter whether you have private landlords or don’t
or you do or you don’t. You’re never gonna be in a position where you’re going to be able to make everybody a homeowner. We’re a fundamental part
of the housing sector. We have to take pride in that, and we have to stand up for ourselves. – Well said, Lisa. I couldn’t have said it better myself. Look, I fully understand that there’s a shortage of housing in the UK, but taxing people is not the answer. It doesn’t provide a
solution to the problem. Building more houses is the only solution I see to this problem, and that could be done
without raising taxes. So why am I continuing
with business as usual? Well, because, wherever tax is concerned, it’s always the customer
who picks up the bill. And in the world of property, we all know the customer is the tenant. When the government increases VAT, it’s not the business that
creates the product or service that pays the extra tax. It’s the customer or the
end user that pays that tax. For that reason, Section 24 is now being referred
to as the tenant tax. Rents will increase because landlords are not gonna be able to run
their businesses at a loss. If landlords aren’t able
to achieve their new rents, then they will be forced to sell, and the tenant will need to
find somewhere else to live. Either way, it’s not good for
the tenants or the landlord. Also, Section 24 is a failed
tax experiment from Ireland, where rents increased 50% between
the years of 1998 and 2001 before it was eventually
scrapped by the government. I’ve been campaigning
against this, and trust me, I haven’t done it just for my own benefit. I’ve done it for the benefit of others, because I have an understanding
how this will work from the research that I’ve done. When the Irish government abolished their version of Section 24, do you think the rents went back down? No. They stayed at the inflated rate. So there are huge efforts being made to have Section 24 reversed before it’s implemented in April, 2017. And this is where you can help
by spreading the awareness. Steve Bolton and Chris
Cooper are two landlords who started crowdfunding for
Axe the Tenant Tax Campaign, which has been supported by
more than 150,000 landlords. Although they were
unsuccessful in a legal battle in the form of a judicial review, it was a route that had to be taken, and they should be
congratulated for their efforts. The fight is not over, and they’re now focusing
100% on the political route on their quest to axe the tenant tax. If you want to find out more
and support this cause with me, I’ll place a link in the description. The website contains lots of useful statistics and information, plus a social media kit to
help people spread the word, which includes ready made
status updates for you to share. It’s believed that 97% of the
UK’s two million landlords have three or less properties and they’re not engaged on landlord issues on a regular basis. Please share this video and
a link to the campaign below to any landlords or tenants that you know to help increase awareness. I have been surprised by
the number of landlords that I’ve met in recent months
who were not aware of this. Of the two million
landlords within the UK, the majority are hardworking people with professional careers who have invested in property to help support their families’ futures whilst providing nice homes for people. Any shares to this video or
just the link to the campaign would be greatly appreciated. What are your thoughts on Section 24 and what do you think will happen? Comments below. It’s now time for question time, the part of the video where
I take one of your questions from the comments on my
social media platforms and I answer it for you. This week’s question comes
from Abi Adu, and she asks, “If it’s the tenant’s fault
in breaking something, “do you deduct it from their
deposit, ask for the money, “or does it come from your own pocket?” It will come from their deposit, and the tenants will be made aware of this when they sign the tenancy agreement. In my experience, it’s very rare that a tenant will cause damage because they know beforehand that they would have to
pay for it or replace it when the property is inspected
before they move out. Most of the items I’ve had to replace are broken or worn out
through normal wear and tear, like a washing machine,
cooker, fridge freezer, which I’ve replaced because I let my properties fully furnished, so it’s all part of the package. Thanks for the question, and if you have a question
you would like answered, then you can leave a comment down below or send me a message on
either Facebook or Twitter. That’s it. As I said at the beginning, I didn’t particularly
want to do this video. I like to focus on the positive things of being an investor and
landlord, but it had to be done. Just don’t let it put you off if you’re wanting to make a start. Just remember that the
UK needs good landlords to provide nice homes for people. Don’t forget that. Please take a second to like this video if you found it useful and share, or just share a link to
the tenant tax website to help raise awareness. Definitely subscribe if it’s your first time
visiting the channel so you won’t miss any of my future videos, which will all be geared
towards helping you start or improve your property business. Thank you so much for watching, and I’ll see you in the next video. – Order!
(crowd yelling) (beep) (crowd yelling) Order! (beep) This House will come to order. (beep) Order!
(crowd yelling) (beep) I will clear what the Chancellor said, ’cause it’s affecting all the people. (beep)

23 thoughts on “Section 24 | Finance Act 2015 | Axe The Tenant Tax | Mortgage Interest Relief on Buy To Let Property

  • I think this is just apart of our current political climate. To remain in office politicians have to pander to individuals that are totally clueless about property investing and enact laws to fight imaginary "elites".

  • Reap the whirlwind BTL debt junkies. BTLers aren't businesses. They are investors. They create the demand they purport to service, by turning would-be owners into renters. They've bought up most of the newbuild supply since 2000 and regular secondary homes… owning 1 in 5 homes. Bring on the bankruptcies of the BTLers. Homeownership and replace the mad leveraged BTLers with solvent low/no debt landlords. Can't wait to see BTLers turned into renters themselves woot.

  • Ireland was different (only applied to new debt) – so previous BTL debt junkies had advantage. You won't be able to hike rents much before voids kick in, and other landlords who are less levered take tenants. Also as better positioned renters buy, they will leave behind lower-income renters, leaving BTLers fewer people able to pay their rents. Get into rented yourselves BTLers. Bankruptcy can be your pension.

  • The clamp down on dangerous buy to let practices appears to be working with record % sales to first time buyers. I am not against traditional landlords who buy a couple of houses with repayment mortgages who are not a risk to the economy. However the interest only/high gearing landlords who are buying up huge amounts of first time buyer homes with tax advantages, crippling amounts of debt, reducing supply and pushing up the prices for everyone.

    It is not a tenant tax, that is an emotive misleading phrase designed by the property 118 website who's members such as Dr Ros ludicrously compared Sec24 to the holocaust. That is simply wrong on so many levels.

    Something needed to be done, the % of home ownership was dramatically falling as landlords bought up all the supply forcing whole generations into rented property. Not by choice but because the system was so weighted to the landlords.

    Yes highly indebted landlords may not like the changes but remember these landlords kept on putting up rents despite years of record low mortgage rates.

  • Disagree mate, houses are too expensive, buy to lets are putting the price up for everyone else. Landlords can try putting the rent up/ or selling both options incentives the tenet to become a home owner. All governments are incompetent and building houses, I would only agree buy to lets get mortgage relief if normal home owners had the relief. That silly woman moaning about food, we don't have a limited number of food but we do with houses.

  • hey there . It would be a very good idea if you could explain us with numbers and more specific with a deposit of 25 000 and a property purchase of 100000 how will the section 24 affect us on our earnings per year. thank you

  • This is deep mate. Ownership is finished. Iclei . International council for local initiatives An end to capitalism. It's hard for you to understand because it's the norm in life. We live the monopoly life. But you must understand capitalism is finished and over the next 20/25 years it'll change, it's already in the process…all businesses,home ownership everything will be over.. this goes back to the United Nations…. 1992 Rio summit…Agenda21 ….. Sustainable development …sustainability …Global warming….. Ownership of homes cars land anything will be finished(for the individual ) it'll be Corporate ran. While the individual lives through the Internet of things, were services and renting will be the norm…as I said its deep open yours eyes because honestly there is nothing you can do…legislation will be implemented taxes also, upper/middle class finished….Bro research what I've said and wisen yourself… Peace bro

  • The government should be grateful for independent landlords and not tax them at all. Has anyone ever seen well run government housing? Its always a crime infested slum in the USA and I doubt it much different in the U.K. The only good and clean rental housing in the USA is the privately held properties. Great job thank you for this video.

  • Tax was meant to improve the life of the Citizens of the country. However the tax hikes we are seeing are just used to save the real elites, who use tax loopholes ending up not paying the tax they are supposed to pay.

  • The all time great Economist Milton Friedman said this "if there is a shortage or anything or if there are price hikes" in any place what soever one can bet their bottom Dollar that the Government caused these issues. After watching this Video it is obvious to see that the UK Government has caused Rents to go up

  • What a fucking moron George Osborne is. Seriously, the government are a disaster. Let them build more council flats. Their fun will come out when they realise what construction costs these days.

  • Landlords don’t provide homes. The houses were there before them and will be there after them. They’re middlemen. S24 is a brilliant piece of legislation making it more fair for FTB, but it doesn’t go far enough. Closing the Limited Company loophole will be next, as well as removing the remaining 20% tax relief on mortgage interest.

  • If I start off my property portfolio within a corporation/company structure will I be exempt from S24 ? Also if one does incorporation on existing property will they get relief under s162?

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