Jump to content
House Price Crash Forum
fru-gal

Simon Lambert: Should Buy-To-Let Landlords Lose Their Juicy Mortgage Interest Tax Break?

Recommended Posts

landlords that are properly certified as such, be that via HMRC, local council licence or whatever scheme is best to ensure that landlords provide a proper service to tenants should keep the tax relief on interest

landlords that don't meet the criteria for proper registration in a scheme that ensures their services and property are of a suitable standard should not qualify

Share this post


Link to post
Share on other sites

No, not unless you are going to hange the tax rules for all businesses.

BTL needs to be charged a much higher interest rate than OO because it is significantly riskier to the bank.

BTL loans should be at business loan rates - 8% at the mo.

Share this post


Link to post
Share on other sites
Many landlords only turn a small rental profit after costs. Erode that by raising their tax bills and they will surely raise rents.

Oh yes, the old raising rents is so easy. It's the easy answer to all businesses cost to margin problems! Just put your prices up! Only it doesn't work quite as simply as that! :lol:

Share this post


Link to post
Share on other sites

If my landlady raises the rent, I'm offski. She knows it. I know it. She hasn't raised in 4 yrs.

Fantasy stuff from LL's - "raise rents" :D:D

Share this post


Link to post
Share on other sites

BTL needs to be charged a much higher interest rate than OO because it is significantly riskier to the bank.

That's a common assumption but not borne out by figures covering the last ten years.

On average BTL mortgages are less like to be in arrears than residential mortgages, or to be reposesed.

At the moment banks are making around three times the profit on BTL mortgages than on residential mortgages with the same price to loan ratio.

Also when things go wrong its much easier for them to reposses a BTL property.

Share this post


Link to post
Share on other sites

That's a common assumption but not borne out by figures covering the last ten years.

On average BTL mortgages are less like to be in arrears than residential mortgages, or to be reposesed.

At the moment banks are making around three times the profit on BTL mortgages than on residential mortgages with the same price to loan ratio.

Also when things go wrong its much easier for them to reposses a BTL property.

Mass BTL has only been going since ~2002.

The currents stats on BTL loans show much large defaults than OO.

Its no easier to repo a BTL than an OO.

You need to repo the BTL then repo/put a charge on any other property i.e. OO.

No, banks are not making 3 times the profit on BTLs thats whey MX/UKAR are shutting down loans.

Share this post


Link to post
Share on other sites

From the comments section;

Paul...., Planet Earth, United Kingdom, about 2 hours ago

Oh dear oh dear think I may have shaken a hornets nest by insinuating that the £14,000,000,000 tax break for BTL investors was firmly under the radar of the Govn and would be cut soon with an announcement in the Autumn Statement...its really funny watching all the cry babies come running out of the woods screaming I will just have to hike my rents, or the Govn will never do this or that, or you are just making this up...blah, blah, blah..As I said before just watch this space as I am reliably informed that this is 'firmly' on the agenda....Hilarious!

Share this post


Link to post
Share on other sites

Even if Osborne goes for the full tax credits cuts that have been mooted here and in the media, there's still another £5bn or so to go from his overall savings. It's got to be either housing benefit (if he really is going all-out for benefits), BTL tax breaks, or pension tax breaks. Or all three.

Share this post


Link to post
Share on other sites

Possibly abolish CGT letting relief? That (contrary to misinformation in the Daily Mail, Guardian, etc) is the only tax concession given to landlords, and it's difficult to see how it can be defended. It should have gone years ago.

(The muddled ramblings about "mortgage interest relief for landlords" come from people who don't understand tax.)

Share this post


Link to post
Share on other sites

Possibly abolish CGT letting relief? That (contrary to misinformation in the Daily Mail, Guardian, etc) is the only tax concession given to landlords, and it's difficult to see how it can be defended. It should have gone years ago.

(The muddled ramblings about "mortgage interest relief for landlords" come from people who don't understand tax.)

It could be argued that what you implicitly characterise as understanding tax is actually being familiar with some aspects of the present taxation regime, which is of course a historical accident. The conventional taxation treatment of debt interest is quite arbitrary and that famous organ of the militant left, The Economist, took opposition to the status quo in a recent leader.

Further, there is a good point made in the This is money article which is that the choice to regard buy-to-let as a business and not just an investment is definitely up for debate. Lambert points out that financing costs of other investments made by a mug investor could not be offset against income for taxation purposes. Seeing as when buy-to-let works it works as a capital gain play, I can't see how the matter is as straightforward as you would propose.

Edited by bland unsight

Share this post


Link to post
Share on other sites

It could be argued that what you implicitly characterise as understanding tax is actually being familiar with some aspects of the present taxation regime, which is of course a historical accident. The conventional taxation treatment of debt interest is quite arbitrary and that famous organ of the militant left, The Economist, took opposition to the status quo in a recent leader.

Further, there is a good point made in the This is money article which is that the choice to regard buy-to-let as a business and not just an investment is definitely up for debate. Lambert points out that financing costs of other investments made by a mug investor could not be offset against income for taxation purposes. Seeing as when buy-to-let works it works as a capital gain play, I can't see how the matter is as straightforward as you would propose.

Agree completely - taxation is completely arbitrary, and if the government wants to tax something differently - or even punitively - then it can do so (tobacco, beards, windows - you get the idea). And the investment/speculation/business distinction (or lack thereof) is an interesting view on it. Certainly the act of simply buying a house to rent out doesn't, in and of itself, fit the idea of borrowing to invest in a business so you could certainly see removal of this perk being justified if it happened - although tbh I can't see it given the vested interests in power.

And you are also correct about the letting exemptions for CGT - quite a rort, and easy to get a good number of years tax free.

I wonder if the govt might even look at general CGT exemptions one day - the annual allowance is really very generous in the UK and most investors should rarely pay any CGT at all with a bit of careful management.

Share this post


Link to post
Share on other sites

No, not unless you are going to hange the tax rules for all businesses.

Land lording isn't a business, it's a tax concession that has now become a welfare state for the middle-classes.

Can't earn a living? Not to worry, nice Mr government says you can tax the peasants in plot #6.

Share this post


Link to post
Share on other sites

I think the playing field should be level or tipped in the favour of the owner occupier.

My problem with taxing interest on BTL is that it may be able to be worked around.

Dear mr bank manager I would like to borrow £250,000 for my plumbing business. Psst not really I am borrowing the money for BTL I am just saying that to avoid tax.

Share this post


Link to post
Share on other sites

Mass BTL has only been going since ~2002.

The currents stats on BTL loans show much large defaults than OO.

Its no easier to repo a BTL than an OO.

You need to repo the BTL then repo/put a charge on any other property i.e. OO.

No, banks are not making 3 times the profit on BTLs thats whey MX/UKAR are shutting down loans.

I was responding to the proposal that the price of BTL mortgages should be raised to reflect their higher risk, so gave figures relating to current lending policies.

The figures you quote are I assume the FSA figures relating to the aftermath of the crash, when it became apparent that brokers had been giving BTL mortgages to people that even with a fair wind would have been a high risk going forward e.g. 95-100% LTV, rental inadquate to service the loans. The MX/UKAR loan book being full of both this type of loan and even worse liar loans.

Since the crash lending criteria have been tightened up all round but especially for BTL. More recent loans at lower LTV and meeting current rental cover requirements have far lower default rates and factoring in the higher interest rates when compared with residential loans are far more profitable.

The reason I know this is that I was recently part of a team reviewing a proposal that we create a asset class based on currenty available BTL loans.

Share this post


Link to post
Share on other sites

you would expect lower default rates if the net cost to the borrower was less than the outpriced renter...the renter is forced to pay not a mortgage but a mortgage plus margin, whilst being held back by MMR criteria and post tax assessment.

These two reasons are the only things making marginal BTL even viable.

I gather much BTL lending is IO too.

excellent income stream through an investment vehicle, little paid off and even level of payments, maintaining the value of the residual of the bond throughout. Another wall of money coming soon.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Next General Election   90 members have voted

    1. 1. When do you predict the next general election will be held?


      • 2019
      • 2020
      • 2021
      • 2022

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.