Jump to content
House Price Crash Forum
Sign in to follow this  
pipllman

Summer Budget 2015, Property Investors Survival Guide

Recommended Posts

Cut pensioner benefits 'immediately'

Ministers should waste no time to make unpopular cuts to pensioner benefits, a think tank director has said. Many of those hit by a cut to the winter fuel allowance might "not be around" at the next election, said Alex Wild of the Taxpayers' Alliance.

And others would forget which party had done it, he added.

Share this post


Link to post
Share on other sites

So, I read it.

It is quite a good document really. Ranjan has put a lot of good research together in an easily accessible format

I picked out a couple of highlights from my first quik read through

It paints a suitably bleak picture for leveraged landlords. If I was one and this was my first introduction to the subject, I would need a sit down after reading it.

Impact on 40% taxpayers: if your gearing is 75%, you will make zero profit from 2020. If your gearing >75%, you will make a loss

Impact on 45% taxpayers: if your gearing is 68%, you will make zero profit from 2020. If your gearing >68%, you will make a loss

GAAR is mentioned and covered quite properly

Warning against magic schemes that fix it - there are none

No mention of Basel III

Share this post


Link to post
Share on other sites

So, I read it.

It is quite a good document really. Ranjan has put a lot of good research together in an easily accessible format

I picked out a couple of highlights from my first quik read through

It paints a suitably bleak picture for leveraged landlords. If I was one and this was my first introduction to the subject, I would need a sit down after reading it.

Impact on 40% taxpayers: if your gearing is 75%, you will make zero profit from 2020. If your gearing >75%, you will make a loss

Impact on 45% taxpayers: if your gearing is 68%, you will make zero profit from 2020. If your gearing >68%, you will make a loss

GAAR is mentioned and covered quite properly

Warning against magic schemes that fix it - there are none

No mention of Basel III

Will read. Re. The sensitivities I'd like to have seen yield incorporated into the analysis.

A formula calculating breakevens based on yields and operating costs would have been interesting.

Share this post


Link to post
Share on other sites

I may be wrong but in 7.5.3. he states that the more interest you pay the more tax you will pay. Not in my view. The more interest you pay the greater the impact of the changes BUT even at 20% Ltv you will still pay less tax than an unencumbered LL.

Share this post


Link to post
Share on other sites

I may be wrong but in 7.5.3. he states that the more interest you pay the more tax you will pay. Not in my view. The more interest you pay the greater the impact of the changes BUT even at 20% Ltv you will still pay less tax than an unencumbered LL.

Yes, your right, I'm only at 2. and he's already said "your mortgage interest payments are now going to be taxed as though it's your income!" which is wildly inaccurate.

Share this post


Link to post
Share on other sites

I liked it.

It will cause more lls to look at clause 24 more quickly than if it didn't exist.

That and that points in approximately the right direction is good enough for me

Share this post


Link to post
Share on other sites

I liked it.

It will cause more lls to look at clause 24 more quickly than if it didn't exist.

That and that points in approximately the right direction is good enough for me

He specifically implies that it's unfair that you're not going to be getting much taxed more than you are already because you're not as leveraged as he is despite the fact that you're getting less tax relief on finance costs and so are already paying more tax than him on the same income! (Noting that income is not profit, something which he apparently doesn't understand.) He definitely doesn't understand the tax changes and wildly misrepresents them, though granted in a fashion that would scare the bejesus out of the average BTLer. He doesn't understand the difference between investment and business and freely switches between the two purely to suit his point in that particular sentence. He uses lots of very silly language in a flagrant attempt to manipulate the reader. He asserts that "we can expect better transition arrangments for existing property portfolio owners" without giving any evidence or reasoning why this should be the case. He doesn't seem to understand that big corporates are primarily interested in yield. He appears to think that large portfolio landlords have a good opportunity to transfer to ltd status and will be able to do so (I haven't even finished reading yet so I'm assuming this will be either expanded upon or contradicted later).

Share this post


Link to post
Share on other sites

It appears to be total garbage but he has consulted 40+ experts so it is qualified garbage. However if people want to take it as gospel that is fine with me.

Yes, that's what it looks like to me too. I'm also fine with buy-to-letters being fed such misinformation by their own. They don't have to believe it.

Share this post


Link to post
Share on other sites

Does it mention that most leveraged BTL'ers will now be 'pushed' into the 40% tax bracket, even if they don't have a job?

Oh dear! :lol:

Yes he gets that bit and mentions it

Share this post


Link to post
Share on other sites

Yes he gets that bit and mentions it

Thanks, I just read it... I think the title is wrong? It should be "10,000 ways to die in BTL." Didn't read much about surviving. :blink:

Share this post


Link to post
Share on other sites

He claims that investors can keep their existing BTL loans when transferring into a Ltd stucture simply by issuing a deed of trust instead of actually transferring the properties but that seems unlikely to be something that would be welcomed by all lenders (remember BTL loans tend to have 30 day redemption clauses) or that will necessarily be well received by HMRC (it's perfectly legitimate to choose to operate as either an individual or as a Ltd company but the particular arrangement suggested smacks of retaining the benefits of one - lower financing costs and the avoidance of out and out ownership transfer and associated taxes - whilst also gaining the benefits of the other, and this could well fall foul of GAAR). What's more he doesn't say anything about the prospects of gaining finance for properties that are actually transferred into a Ltd structure.

Some of his advice is quite dangerous - "Quit the day-job!" - and doesn't account for the possibility that house prices and rents can go down as well as up.

Interestingly he also seems to be pretending that a particular type of investor - the large portfolio lettings agency using BTLer - doesn't really exist.

Share this post


Link to post
Share on other sites

I may be wrong but in 7.5.3. he states that the more interest you pay the more tax you will pay. Not in my view. The more interest you pay the greater the impact of the changes BUT even at 20% Ltv you will still pay less tax than an unencumbered LL.

Richard Dyson made the exact same mistake in one of his whingographs.

Share this post


Link to post
Share on other sites

I haven't read it yet, but will

Ranjan Bhattacharya's Property Investors Survival Guide, Summer Bidget 2015 edition

https://gallery.mailchimp.com/e3d8c92af1835f8fe29f2d776/files/SUMMER_BUDGET_EMERGENCY_REPORT.pdf

He didn't read it himself.... in massive letters on the front page it says:

How To Prosper Form The Changes

Doesn't anyone ever proof-read anything any more? :-(

ps. I like the picture on page 18 :)

Edited by mrtickle

Share this post


Link to post
Share on other sites

Usual errors re interest being income etc already highlighted on this thread. The picture on page 18 pointed out by Mr McTickle probably best describes the multi property leveraged LL position better than all the words 'a picture paints a thousand words' :).

Interesting his cut of of LL cohorts is 10 properties and over 10. Indeed it is my very experience that the LLs with under 10 are already looking to sell 2 or 3 to reduce debt. I am generalising but seem to have bought better value over many years rather than the mega LLs. Also they seem to have gains locked in and are 'happy' taking a CGT hit each year - but definitely stopped them in their tracks.

Those with > 10 just don't know what to do. Lots of properties with no gains because they bought fast and borrowed high. They can sell to reduce debts but because they have no gains they don't see the point. Their advantage is they could sell 5 in one tax year and not pay CGT - their disadvantage is they just don't want to scale down their leveraged 'currently' income profitable position. Mentally they seem locked it.

As I see it those mega landlords own something that effectively they cannot control. Many in their fifties - what are they thinking? What happens in 15 years time? Even if prices were higher how do you get out? The kids may not want 50 tenants and 50 debts. This is not like a company you pass over to a business partner if the kids dont want it - but a personal holding messy and cumbersome - and a personal risk built in for the successor.

I have drifted onto another thread - so will probably repeat this another time over there.

My view - errors as highlighted - interesting - really like the format makes it very readable - but just the picture in page 18 would summarise the position for the 118'ers.

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
Sign in to follow this  

  • 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.