Abolish Btl Mortgage Interest Relief.

[Tester]

What would happen if new tax rules stated that interest on BTL mortgages could no longer be offset against tax?

Currently, someone with a BTL property can call the interest payable on the mortgage an expense so drastically reducing any tax bill. With a home owner mortgage the interest cannot be offset. The tax rules favour Landlords. If the rules were changed how would that affect the BTL market, the rental market and the supply of property for sale?

[Time to raise the rents.]

What would happen if new tax rules stated that interest on BTL mortgages could no longer be offset against tax?

Your rent would go up.

And why would any sane govt do that anyway? Borrowing is a legitimate way to fund any business or investment & the interest is therefore a valid deduction against the income.

[justanewbie]

What would happen if new tax rules stated that interest on BTL mortgages could no longer be offset against tax?

<{POST_SNAPBACK}>

I can't see why this would ever happen.

The loan is a business loan.

The interest is a taxable business expenditure.

[MarkG]

Your rent would go up.

No it wouldn't. If people with big mortgages tried to pass the cost on to their tenants, those tenants would move to rented property where the landlords _didn't_ have big mortgages. Like where I live, for example.

I'm kind of amazed that you claim to be a landlord yet you think that you can raise rents at will without losing tenants to your competitors.

[Time to raise the rents.]

No it wouldn't. If people with big mortgages tried to pass the cost on to their tenants, those tenants would move to rented property where the landlords _didn't_ have big mortgages. Like where I live, for example.

I'm kind of amazed that you claim to be a landlord yet you think that you can raise rents at will without losing tenants to your competitors.

<{POST_SNAPBACK}>

Typical tenant speak & an answer that I expected.

How will you go about identifying the landlords with low mortgages? Won't their tenants want to stay? How will you displace their tenants, with an offer of higher rent? Won't those landlords want to raise their rents with the market when their tenants leave?

It's called Cost Push Inflation and its very difficult to fight.

[eek]

No it wouldn't. If people with big mortgages tried to pass the cost on to their tenants, those tenants would move to rented property where the landlords _didn't_ have big mortgages. Like where I live, for example.

I'm kind of amazed that you claim to be a landlord yet you think that you can raise rents at will without losing tenants to your competitors.

<{POST_SNAPBACK}>

I'm amazed that people forget that BTLers fall into two distinct types. One lot are professional landlords who treat it as a business (TTRTT is almost one of those) who probably haven't bought anything since 2000, understand that interest is a business expense and as costs rise even the lowest cost landlord will have to raise his prices to cover this 20% increase in cost.

The other lot are those that saw BTL as a pension or investment. Yes they may already be subsidising their tenants and they would not be able to pass all the increase on to their tenants but they would be able to pass a fair bit on.

[Levy process]

Typical tenant speak & an answer that I expected.

How will you go about identifying the landlords with low mortgages? Won't their tenants want to stay? How will you displace their tenants, with an offer of higher rent? Won't those landlords want to raise their rents with the market when their tenants leave?

It's called Cost Push Inflation and its very difficult to fight.

<{POST_SNAPBACK}>

Yea, and people would suddenly have a lot more to pay in rent, and so they would have less to spend in the high street, and so more businesses would go bust, and so more jobs would be lost, and so people would have less money to spend, but of course there would still be plenty cash left over for paying increased rents. O hang on......

[Time to raise the rents.]

Yea, and people would suddenly have a lot more to pay in rent, and so they would have less to spend in the high street, and so more businesses would go bust, and so more jobs would be lost, and so people would have less money to spend, but of course there would still be plenty cash left over for paying increased rents. O hang on......

<{POST_SNAPBACK}>

Somehow you seem to have stumbled across the reason why it would never be done. Because it would hurt the masses and the masses vote!

I should add that if the masses are represented by this forum, their vote may be unreliable & they may support such a twisted scheme to their own demise.

Edited August 1, 2005 by Time to raise the rents.

[Levy process]

Somehow you seem to have stumbled across the reason why it would never be done.

<{POST_SNAPBACK}>

O come on now, give me some credit.

[Time to raise the rents.]

O come on now, give me some credit.

<{POST_SNAPBACK}>

Only if you acknowledge that it ain't gonna happen......

[FreeFall]

Somehow you seem to have stumbled across the reason why it would never be done. Because it would hurt the masses and the masses vote!

<{POST_SNAPBACK}>

Yup, heaven forbid that NL would do anything that hurt the masses such as taking us to war, student fees, increased stealth taxes, rampant and innefective rises in public spending....ad nauseum

[IP Newcomer]

And why would any sane govt do that anyway?

<{POST_SNAPBACK}>

The same reason they put up stamp duty and pile on council tax, because they can and they need the money.

Borrowing is a legitimate way to fund any business or investment & the interest is therefore a valid deduction against the income.

<{POST_SNAPBACK}>

Their ain't no such thing as fairness in tax. It's simply what the law says. Training for example is not a business expense - and there's no real logic to that but it's what the tax law says.

The way in which the government could do this is to not allow interest against Schedule A income - or to not allow interest against Schedule A income for residential lettings. They could do it very, very easily.

That being said I don't believe that they would or should. It would be another distortion in an already distorted system. Interest is simply a cost of doing business.

The present system does not distort the housing market as landlords pay tax on profits. If they are not making profits they cannot deduct the tax - not even on loss set offs from Schedule A. They would be able to set off the Capital Gains Losses that they suffer against either other capital gains. (They would also be charged for Capital Gains, but if they only entered the market recently that will all be academic).

The reason why MIRAS was introduced was that back in the day homeowners were assessed to income tax on the perceived rental income that they would have paid if they had rented (rather like the old rates). So if you had a house that you would have paid £100 a year in rent (this was back in the day) then this would be added on to your Income Tax assessment.

To encourage mortgages (I think it was) Stanley Baldwin's government allowed home owners to offset their interest costs against this assessment. Then in the fifties (again I'm not sure exactly) the charge against home ownership was removed. However the popular Interest relief was kept on for obvious electoral reasons.

[BandWagon]

It's called Cost Push Inflation and its very difficult to fight.

<{POST_SNAPBACK}>

Really?

Rent is included in the government's basket of goods used to determine CPI.

http://www.statistics.gov.uk/articles/nojo...basket_2005.pdf

So raising rents will simply help towards rising interest rates (Whereas rising house prices don't)

Edited August 1, 2005 by BandWagon

[MarkG]

How will you go about identifying the landlords with low mortgages?

Like, duh... they'll be the ones charging lower rents due to lower overheads.

It's called Cost Push Inflation and its very difficult to fight.

People renting houses can move to flats, people renting flats can move to flat-shares, people in flat-shares can move back in with their parents.

Rent rises are one of the easiest kinds of inflation to fight... you just move down market. I'd have thought a landlord such as you claim to be would understand these things.

[frugalista]

What would happen if new tax rules stated that interest on BTL mortgages could no longer be offset against tax?

<{POST_SNAPBACK}>

No change in tax law is required. Amateur, overly exuberant BTL is riddled with corruption, just like any business which is in the process of booming. To kill off BTL, all that's needed is for the government and lenders to apply the current rules a bit more strictly:

-- The practice of counting negotiated sales discounts as deposits should be stamped out.

-- The practice of personally moving in to a BTL flat in order to sell it and thereby avoid capital gains tax should be stamped out.

-- Owner-occupier mortgages should be audited to see if they are actually BTL mortgages (which require higher interest). If so the owner should stump up the difference in repayments since the property was rented out.

-- Rent should be audited more closely to see if they indeed cover the proportion of the repayments stipulated in the mortgage agreement.

-- A lender should be auditing the market value of BTL properties more frequently. If the valuation drops so low that the LTV of the property is higher than the mortgage agreement stipulates, the landlord should be forced to pay off enough of the mortgage to bring it in line again.

This isn't a wish list, these are the current rules of BTL lenders. Lenders have been lazy or turned a blind eye to this stuff because of the rising market. I fully expect them to start re-assessing the risks of these loans. Then you'll see a rush for the exit by amateur BTLs. Large professional LLs have nothing to worry about as they stick to all the rules already (?).

frugalista