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pipllman

Plenty Of Btlers Still Don't Know About The Budget

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I have been on a bike ride this afternoon

I passed this development

http://www.bellway.co.uk/new-homes/yorkshire/centurion-fields

It is the first time I have passed it since almost complete houses have been present

There was a guy parked up (RR Sport as it happens), peering through the fence. I stopped next to him and peered through the fence too. We got talking.

He hopes to buy 2. He thinks the yields will be good due to proximity to the A63 / M62

I asked if the yields etc. were still attractive with the proposed budget changes in mind.

"What budget changes?"

The ones where the gross rent is treated as taxable income and the interest is only reclaimable at 20% - clause 24 in the proposed Finance bill

"Never heard of it. Will it make much difference to me, I have 10 houses just now?"

I said I didn't really know much more than the headlines and that he might want to look it up on the internet

Then bid him good day and pedalled off, unconsciously shaking my head

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We have to be careful with anecdotes because they may not be representative but this is a common theme on the 118 threads as well.

I had to inform my old LLs (also friends) about the change. How can you not know if you own 5 leveraged properties?

The only conclusion I can come to is that several decades of house price growth have so engrained house price inflationary expectations to the extent that many have concluded that research and knowledge is a hindrance. (My BTL friend basically said that "stop thinking start doing")

I remember reading about the 1970s inflationary experience and how the central banks at the time had to work really, really hard (Volker) to shatter inflationary expectations. Same about uk hpi?

At the end of the day, the budget changes are in the future, to be resolved in the future. I'm increasingly coming to the conclusion they will not cause an immediate hpc...yet... because BTLers are not acting rationally and won't believe / know about changes until enacted (in 2019 when they complete their tax returns).

Also, lenders have loosened credit availability to BTLers if anything. Further giving signal all is great.

Interestingly this seems to be what Angela from pt wrote on one of Vengers posts the other day. She was considering a crash rush for exit scenario but nothing happened.

The budget changes are just more 'interest rates will rise in the future' warnings but i wonder if to shatter inflationary expectations we need an immediate hit to the wallet.

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Without wanting to change the subject too much and seeing as this thread is about being ignorant of tax situatuon. Can someone tell me if I am interpreting this wrongly?

http://www.which.co.uk/money/tax/guides/tax-on-property-and-rental-income/how-rental-income-is-taxed/

"Your rental profits are taxed at the same rates as income you receive from your business or employment – 20%, 40% or 45%, depending on which tax band the income falls into."

So this means that if you've got a business that makes you £50,000 a year, employs others, contributes to employement elsewhere as part of an industry and 80% of your business is overseaas trade, so you are bringing in money into the UK (therefore playing a part helping the trade deficit) and you aren't a landlord. You pay higher rate tax @ 40%

Wheras if you've got a part time job that makes you £3000 a year or no job at all, but a "property portfolio" that gets you £50,000 a year, you pay 20% on that £50,000?

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Without wanting to change the subject too much and seeing as this thread is about being ignorant of tax situatuon. Can someone tell me if I am interpreting this wrongly?

http://www.which.co.uk/money/tax/guides/tax-on-property-and-rental-income/how-rental-income-is-taxed/

"Your rental profits are taxed at the same rates as income you receive from your business or employment – 20%, 40% or 45%, depending on which tax band the income falls into."

So this means that if you've got a business that makes you £50,000 a year, employs others, contributes to employement elsewhere as part of an industry and 80% of your business is overseaas trade, so you are bringing in money into the UK (therefore playing a part helping the trade deficit) and you aren't a landlord. You pay higher rate tax @ 40%

Wheras if you've got a part time job that makes you £3000 a year or no job at all, but a "property portfolio" that gets you £50,000 a year, you pay 20% on that £50,000?

No you would pay 20% up to 43K minus tax allowance 10K ish then 40% on everything above

The change in the BTL tax is to do with what is classed as income/profit mortgage interest payments were /are tax deductible going forward they will not be

I.e if you had a job paying say 10k and a BTL that produced 6K in rent but mortgage interest payments are 4K a year your taxable income would be 12K in the future it would be 16K the mortgage interest payments will not be deductible (theirs other factors but this is the jist of whats going to happen )

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