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200p

The Propertypodcast Says The New Tax Changes Are A "bombshell"

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and outlines the hits they are going to get.... (I came across them by accident on youtube, and I don't own any BTL or intend to)

The propertypodcast is a website for property investors (About page)

http://thepropertypodcast.com/2015/07/tpp123-budget-special-5-ways-property-investors-will-be-affected/

We were anticipating a quiet few years for property investors with the Conservatives in power, but how wrong we were…

The emergency Budget contained a lot that will directly affect investors – among the measures, an absolute bombshell that will have a dramatic impact. In the first episode of our two-part special, we explain the most important changes you need to be aware of – and next week, we’ll discuss what action you should take as a result.

It’s a very number-heavy episode, so you might benefit from reading these notes alongside it…

6 ways investors will be affected 1. Removal of the wear and tear allowance for furnished properties

<snip>

2. Increase in rent a room relief

<snip>

3. LHA rate frozen for 4 years

<snip>

4. Restriction of tax relief on mortgage interest

This is the big one! The ability to claim your mortgage interest as a cost is being removed, and replaced with a tax relief of 20%. It’s being gradually phased in to take full effect in 2020.

The bottom line is that basic rate taxpayers are unaffected, and everyone else will be paying a lot more tax unless they take action.

It’s also important to note that this only applies to individuals: companies holding property can still claim mortgage interest as a deduction.

Let’s take the example of someone who has £10k of annual rental income, with £5k costs in the form of interest payments. (To keep things simple, we’ll forget all other costs.)

Now:
You deduct the £5k interest costs from the income to give you £5k in annual profit. A basic-rate taxpayer pays 20% tax on this profit (£1k) and a higher-rate taxpayer pays 40% tax (£2k).

In 2020:
The £5k interest costs can’t be deducted, so the taxable profit is £10k. Before paying tax on it, you can claim an allowance of 20% of your interest costs (£1k).

The basic-rate taxpayer ends up paying (£2k – £1k = ) £1k in tax – the same as before.

The higher-rate taxpayer ends up paying (£4k – £1k = ) £3k in tax – a lot more than before.

5. Corporation rate tax cut

Corporation tax will be cut to 18% by 2020, which will make it more appealing to hold property within a limited company.

However…

6. Changes to taxation of dividends

The 10% tax credit on dividends is being removed, and instead the first £5,000 of dividends will be tax-free. After that, basic rate taxpayers will pay 7.5% (up from 0% now) and higher rate taxpayers will pay 32.5% (up from 25% now).

This makes it more costly to extract profits from a limited company – and current thinking is that this is just paving the way for further increases, to the point that dividends are taxed at the same rate as income.

Phew! Next week…what to do about it

---

They have a Youtube channel, and have uploaded most of their episodes, but have not done so after the election (complacency?)
There appears to be a lot of free info on the podcasts - save yourself thousands on those maria davis / inside track type seminars!
Edited by 200p

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This week he sells everything. Next week he tell you to sell everything.

You don't have to be the fastest runner in the pack to avoid the bear catching and eating you, simply a bit faster than most everyone else.... So yes the blogger is stealing a march on his readers....

And that march is straight down to the estate agents...

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Actually a brilliat website. I applaud them.

Of course they're quite right, unlike the Mark Alexanders of the world who are praying.

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Surely that's not being removed, they just have to actually have spent the money on the upkeep of the the property?

And provide receipts of expenditure rather than just claim a blanket allowance..

Still open to abuse of sorts though as the LL can purchase for his own abode and perhaps those of friends and put it down to tax.

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Surely that's not being removed, they just have to actually have spent the money on the upkeep of the the property?

Correct in theory,as it was only applicable to furnished lets ..but from what i can make out most just ticked the box even if the places was not let as furnished as they knew it was to hard to police so for them it is being removed as they are not letting a furnished place but were getting the 10%

..

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Listened to this a couple of hours ago whilst resting my eyes, away from the computer. Did they say something about having a forum full of sharp landlord comment about the implications?

Going to replay it. First time around I fell into a nice smiling sleep as they began venting their claims about landlords having voted Conservatives in for their majority, and their claims about the brave landlords of the land, and their property-pensions, who've been 'attacked' by this tax-relief change. Welcome to the real world.

Edited by Venger

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Listened to this a couple of hours ago whilst resting my eyes, away from the computer. Did they say something about having a forum full of sharp landlord comment about the implications?

13:39 (Later ... 'angry.. attacking middle class' / landlords won it for Conservatives / attacking the uneducated') Geez.

This is the absolute bombshell that we didn't see coming, and there is a massive thread about this on the Property Hub that we'll link to in the show notes as well, with some really great points being made about this, but whichever

way you slice it, it's not good news.

Turns out I had already read it and yawned at it. 4 page-massive.. 'raise the rent'

http://thepropertyhub.net/forum/topic/2240-budget-summer-2015-what-does-it-mean-for-property-investors/

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Listened to this a couple of hours ago whilst resting my eyes, away from the computer. Did they say something about having a forum full of sharp landlord comment about the implications?

Going to replay it. First time around I fell into a nice smiling sleep as they began venting their claims about landlords having voted Conservatives in for their majority, and their claims about the brave landlords of the land, and their property-pensions, who've been 'attacked' by this tax-relief change. Welcome to the real world.

Same with doctors who don't want a 7 day week NHS but still went out and voted Tory. And all the other people - Teachers and anybody else who went out on strike in the last parliament etc.

They've had plenty of notice. Or did they forget as soon as they picked up the Sun, on the morning of the election?

---

Edited by 200p

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Well people can always stick money into the Tories old favourite - the City. Remember they have raised the ISA allowance to some £15K now. And people can take money out their pension as a tax free lump sum - just don't stick it into BTL (from this budget people herding).

You can now put AIM penny shares into an ISA tax free wrapper (LIBCON change). If we get a dot.com boom again, £1k in a dot.com stock turned into £64K in 3 months - and that would all be capital tax gains free! LOL

Edited by 200p

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The second part is UP.....

TPP124: Post-budget survival tactics for property investors

We discuss:

  • How to best cope with the removal of the wear and tear allowance
  • Mitigating the impact of the higher tax on dividends
  • Whether forming a limited company is a good solution for the mortgage interest relief bombshell
  • Reducing your taxable profit by paying yourself a management fee
  • The benefits of buying properties that need a refurb
  • Strategically splitting ownership between couples to reduce tax

http://thepropertypodcast.com/2015/07/tpp124-post-budget-survival-tactics-for-property-investors/

Edited by 200p

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Sounds like they're taking a realistic approach, looking at different options under the altered tax position.

At no stage in the podcast did I hear them raise the possibility of lobbying against the changes.

Not that I'm warm towards any BTLer, but they sound upbeat throughout, so I doubt they're carrying extreme levels of BTL mortgage debt.

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Well people can always stick money into the Tories old favourite - the City. Remember they have raised the ISA allowance to some £15K now. And people can take money out their pension as a tax free lump sum - just don't stick it into BTL (from this budget people herding).

You can now put AIM penny shares into an ISA tax free wrapper (LIBCON change). If we get a dot.com boom again, £1k in a dot.com stock turned into £64K in 3 months - and that would all be capital tax gains free! LOL

Noone can take more than 25% of a pension out tax free.

When I'm about tomorrow I'll list all the taxes in moving out of pension to BTL.

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This week he sells everything. Next week he tell you to sell everything.

That's the way I see it happening. The people who have worked it out will be selling up .. Or maybe they'll all hang on assuming the rules will be changed back

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