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Will Buy-To-Let Tax Changes Push Rents Up Even More?

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There is bound to an effect as landlords try to recoup losses through taxation ect....

The key will be as to whether it sticks..

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Yet more 'Head I win, tails you lose' blackmail from the landlords.

I'm starting to get sick of their moaning. I'd prefer that they recognised the huge favours they've been done so far, took the money they've made off the backs of hardworking people and exited stage right.

As it is now, they're becoming more hated than estate agents, that should tell them something.

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There is bound to an effect as landlords try to recoup losses through taxation ect....

The key will be as to whether it sticks..

Yeah; some tenants might wear £10 a week... but not much more. Rents are not set by what BTLers need to cover their costs.

Try hiking too hard and welcome to hard voids. Markets move at the margin.

No fear here. Embrace it. Or dance to the BTLers tune we must obey.

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Already been given notice that our rent is likely to rise by £75-100 per month after summer, unfortunately we're paying less than market so gives me no haggling room (yet).

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This situation could be regarded as slightly different because it may lead to a large swathe of BTLers having their costs raised in parallel. It's far easier to raise rents when everyone else is also doing it (or trying to!?)

The much reported 'boom' in the number of properties coming onto the rental market (over 50% in my area) due to the rush to beat stamp duty rises is far more disruptive in my view, and should lead to tenants being able to gain the upper hand for a while in negotiations.

The "industry" (it ain't, but) is hugely fragmented - with an army of one man bands subject to massively differing cost, tax, and financial pressures depending on degree of indebtedness and non-BTL income. On the one hand, some of that army are royally fecked by clause 24 - but many are not. And on the other you've got a huge blip in new entrants.

I think there could be a weird rental market over the next 6 months with the extremes, high and low, in asking price becoming more pronounced. But it will be transitory. In the mean time, practice your market awareness, negotiation skills, and landlord due dilligence. There are as likely to be some rental bargains as there are highly mortgaged desperados clutching at high rent straws.

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Ahh buckers, giving us the view of ye-olde-landlord - forever HPI and nasty banks and financial industry... vs real something real bricks and mortar, people-farming yeahhh greatness.

Taken on more BTL debt buckers?

BTLers power to raise the rents is limited.

Many BTLers are going to find out who the landlords really are - banks, who want hpc and fresh volume lending, imo, whilst giving major political advantages for homeownership. Keep counting HPI savings into the HPC hehehe.

I cancelled my pensions and bought into BTL. Luckily for me this was the early nineties. I see no difference between giving your money every month to the tricky con-merchants that make up the City of London and BTL. You're simply trying to defer consumption and save that wealth in a way that might reliably be drawn down in the future. Just think of the damage the City has inflicted upon society over the last twenty years.

There is a general anti-BTL meme on HPC, but really - What are people supposed to do with their savings? And please don't suggest anything that puts your money anywhere near the banks or pensions industry - they've shown what they are laugh.gif

FTSE ? Oh yes, let's make lots of good noises about something that's lower than it was in the year 2000 laugh.gif

However, I agree that recent BTL are probably screwed in the mid/long term. When rents drop (they will IMO, unless someone can show me good reasons for wage inflation) it will be older established BTL that lower their rents to fill voids, leaving newbies high and dry. A house I let for £800 pcm in 1991 now lets for £880 today - 10% rent growth in twenty years !

So, let's say someone has £1000 per month savings, let's hear some valid suggestions from people here that could offer a retirement savings strategy? - I'm all ears.

BTW - why is this thread in off-topic? blink.gif


Some hpcers who were previously, just a year or so ago, red-hot for HPI champagne ripples and glory for BTLers, pointing to the wisdom of BTLer HPI gurus, might now be changing their view to tell us BTLers are 'just human beings doing what they thought were right and not deserving of any change to their position' - not me.

[...]You exaggerate the consequences for renters. It is a pain in the @rse having to move, but it is not, "loosing [sic] the roof" over your head, it is changing the roof. I've been booted out by landlords who were selling up. On one occasion I moved somewhere much cheaper, and on another occasion I moved to somewhere larger and more expensive, (because local rents appeared to have softened between 2007 and 2012 and thus the larger stuff looked like better value ;) ).

Likewise, I think that you exaggerate the pain for BTLers. They take a punt; maybe they win, maybe they lose. If they are taking that punt because they don't see any other investment that will give them the capital gains and investment income that they need to make up for the fact that they don't have a pension, then the heart of their problem is not BTL, it's the fact that they haven't made adequate provision for a retirement income. If they took the what savings they did have and put it all on a horse, we wouldn't (well, I wouldn't) be here posting "Oh, the poor devils, the terrible pain!", I'd just think that it was unfortunate that a fool had made their poor position worse by being foolish. The fact that 'retail investors' believe that there is a difference between leveraging up what little you do have and taking a punt on UK property in 2014 and betting on horses is bizarre to me, especially as we must have a sizeable cohort of 2007/2008 BTLers who got into the wrong markets at the wrong time and had their financial faces ripped off.

Finally, look at the risk reward profile for renters. Let's say rates rise enough to make prices fall. Maybe during that correction they have to move, maybe they get screwed for an extra tenner a week in order to avoid moving. It's not the end of the world. But maybe they gain the opportunity to buy at prices discounted by somewhere between 25%-40%. It won't make a poor man rich, but the truth for me is that I presently regard part of my rent expense as the price that I pay for having somebody else take the balance sheet risk with an illiquid frothy asset that I would rather pay them to take than take myself.

Instead of rubbing hands about rising rents, also consider rents can fall.

..Also you're totally missing the point. The anecdotal is consistent with falling rents, because the rental achieved recently is lower than the rental achieved earlier.

However, we can add to the anecdotal because one way to square the circle is to propose that the BTLer took all that time because they couldn't at first accept that they were going to have to accept a lower rent in order for the market to clear. Basically, the market stayed irrational* longer than they could stay solvent, so eventually they folded and let at a lower price. Now that suggests that some BTLers are simply unable to believe that rents fall, and you are giving the appearance of being additional anecdotal evidence to that end.

It also suggests two tricky questions for BTLers. How long do you keep a property void in order to wait for a pinch point in the mismatch between supply and demand to allow you to lock in the rent you want, and how many times does 'bad luck' on this score result in BTLers wiping out all their profits? On thin margins even a single month void is bad news. The take home message is - a wise BTLer with any sense wouldn't hold the property void for too long. If that meant pulling the rent down sharply then plenty of BTLers will do just that, with the earlier entrants able to pull further down without turning cash flows negative. In the teeth of the next recession with all these piss weak late entrant BTLers desperate to avoid voids, rents could fall quite sharply. Sweet. Again, combine that with the end of FLS, BCBS RWA revisions and housing element of UC being trimmed and some late entrant BTLers are going to find that a 5% gross yield was just a ticket to an enormous capital loss on an investment with a negative carry. Double sweet.

* Irrational according to the BTLer, natch.


I couldn't care less how you made out. Through your actions you were complicit in financial capture. You've picked sides already, and you favoured a horrid notion of yourself in splendid isolation over your ability to live equitably with your neighbour, (sorry, tenant), and damn the consequences. That speaks plainly to what you are.

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Contra or in excess of I think it is possible that rents go up even if/where market rents are currently being charged.

Where demand is high and getting higher as some landlords give tenants notice, supply falls but demand remains the same. More affluent tenants can afford to pay more. Less affluent tenants are forced to cram themselves in more (go from their own place back to sharing, or getting rid of reception rooms, moving in with partners), spreading the rent among more people and enabling them to pay increased rent.

But if the decrease in rental supply is big enough, will this also mean a big enough increase in housing supply to cause prices to fall?

If so, will landlords be happy that their gross yield went from 4% to 4.5%, or unhappy that prices fell by 10-20% or whatever?

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You're the one suggesting it's going to be easier to raise rents because of so many BTLers in difficult position.

It was this point I was focussing on. Let them try. :)

'Far easier to raise rents when everyone else is also doing it.' (The BTLers)

This situation could be regarded as slightly different because it may lead to a large swathe of BTLers having their costs raised in parallel. It's far easier to raise rents when everyone else is also doing it (or trying to!?)

The much reported 'boom' in the number of properties coming onto the rental market (over 50% in my area) due to the rush to beat stamp duty rises is far more disruptive in my view, and should lead to tenants being able to gain the upper hand for a while in negotiations.

Then we have the other part, which should also play down on rents, as you suggest.

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It's no big deal my highlighting your position as a landlord, following on what seemed to be your focus about rent rises ahead - (it wasn't clear) - I simply pushed back with reasons why BTLers won't easily be able to do it as a group. When it appears a BTLers is on side of rental hikes, on hpc vs those of us priced out, and BTLers with many homes... got to expect a little bit of pressing ('rubbing hands').

However...

Why don't you tell us....?

You've highlighted how there has been a surge in new supply rental property to market in your your general area.

How are you going to respond as a landlord going forwards?

With Section 24 weighing down on more BTLers going forwards, and 3% higher stamp duty any new buyer going forwards, have you given more thought about selling some of your rental properties? Plan to keep rents steady or seek more rental income. You could give us some insight.

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Thanks buckers.

Interesting post - thanks.

I would argue you could be affected if those at the margin being selling off for lower prices. That's what causes wider markets to fall. It's okay a BTLer owning outright, or nearly outright, pointing to their tiny mortgage, but they also have capital values to consider. Unless you're not so worried about that, and just want regular rent.

I still hold that BTLers will find it hard to push up rents by much, and if they can get a few more pounds, then it's only during a wider shakeup when BTLers selling up at lower prices bring down values, and renters become homeowners.... giving in notice to other BTLers.

Can agree on being surprised at the apparent surge of BTLers racing into beat 3% stamp duty hike - each time I believe they can't be that greedy/stupid, they surprise me even more - although all too often to date, they've been the ones to tell me they're smart and tell me of their BTL mad gainz over the reflation years to prove it. Awaiting to see more proof about BTL surge to the deadline, but did read blogs from conveyancers describing their full-out workloads to get things through for the BTlers.

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You're all still underestimating the amount of landlords who don't believe they should be paying tax when they most definitely should be..

Spoke to some who haven't paid tax on their rental income for 7 years.. Not even a sniffle from HMRC

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You're all still underestimating the amount of landlords who don't believe they should be paying tax when they most definitely should be..

Spoke to some who haven't paid tax on their rental income for 7 years.. Not even a sniffle from HMRC

Its possible that they are so mortgaged up that they aren't making a profit but even that will change.

The last BTL amnesty was to allow HMRC to test their big data sets that allow them to identify people renting houses who weren't paying tax (and they have a lot of information to play with). Once that's been done I believe another campaign will begin with large penalties attached.

Two things to add is that HMRC will probably just guesstimate the amount owed (don't expect it to be fair or accurate) and will have a field day as deliberate misrepresentation allows them to go back 30 years if they desire...

Edited by eek

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Pressy proved himself to be a real anti-HPCer (imo) - as in no fear prices would fall, and - as I remember it - similar stuff other HPIers come out with... eg 'house prices falls means savers lose all their savings and owners get let off their debt and left with the houses anyway, so why even bother wanting hpc') - but he did seem very informed on technical knowledge in accountancy/tax specialisms.

Also I should add, it doesn't matter so much if some BTLers do get away with not declaring. Seems to me more than enough declared their BTLs, to affect the market under Section 24. Those BTLers can't suddenly stop declaring without it coming to HMRC's attention (imo - especially with Big Data, and its rumoured superbness).


Basically about a chap moonlighthing where the tax evaded and penalty was proven to be around £5k.
But this guy has £700+k of assets which was purchased using fund he obtains from moonlighting but
are not declared to the HMRC. So, the court ordered the confiscation of the entire £700k, not just the tax owed.

http://www.bailii.org/ew/cases/EWCA/Crim/2011/75.html

By extension, if a BTL landlord build his portfolio through remortgaging etc but did not declare the rental profit,
then the entire sum benefited may well be the entire BTL porftfolio as then the entire BTL income will be 'criminal activiites';.


Pretty sure this will go to the supreme court..


This case flows from Anti Money Laundering legislation and the Proceeds of Crime Act.

There is a now a thing dividing line between Tax Evasion (Not avoidance, note) being subject to a Civil Penalty and a Criminal Offence.

Same with VAT.

Purposive Tax Evasion (i.e. not genuine mistake or error) of significance (And presently £5k is of significance) means all and any assets gained via Money Laundering automatically qualify as a Crime.

Whilst HMRC could no doubt spend time and investigation, to prove how each property purchased was achieved by undeclared income (Evasion) why bother?

They can (And do) resort to POCA to take the lot, in penalty.

(Because of my professional practice, I am necessarily regulated and compliant to AML and POCA).


AML and POCA are hugely swingeing.

In theory, anyone else complicit in this guy's crime (or anyone else's come to that), such as accountant, solicitor, mortgage broker etc, risks a huge fine and the slammer.

This is because anyone in the range of activities regulated by AML and POCA is obligated to report any Suspicion of ML and benefit therefrom: note, suspicion, not absolute certainty.


Another thought.

Many B2Lers failed to advise their mortgagees the property was to be tenanted from the outset: so they enjoyed a lower interest rate.

Technically, lying on any application for credit is a criminal offence.


FYI since for some reason, you seem to be full of angst and denying facts of law.............

When his whole matter of AML started some years back, I was attending a CPD session (Continuing Professional Education: essential for renewal of Practising Certificate and thus earning a living): the seminar speaker was an ex Inland Revenue Senior serious fraud investigator, now senior partner in a major UK accountancy practice.

I asked him what constituted a "Crime" under POCA: for example, I said, does concealing income by under-declaring tax, or wittingly (i.e. knowingly) moving profit to , say, an offshore account constitute a crime.

Yes; he said, absolutely.

Another aspect of recent: HMRC are at present undergoing a consultative process on planned investigation into SME Business Records. Both incorporated and un-incorporated.

Swingeing fines of > £3K will be levied.

Thus your exemplar of IT bods whose records and tax affairs are not 100% will undoubtedly be captured: and they then risk not only a process fine for the failure to keep proper records: but heavy penalties for the undeclared/under-declared tax: and even POCA prosecution if the sums are significant.

It has been a potential criminal offence to evade tax for many years: I was asked to assist one client quite some years ago who had just come out of the slammer for tax and VAT evasion.

It was quite obvious after a couple of meetings and my practice examining his "Records" and evaluating how he conducted his business, he had failed to learn his lesson.

I passed.


AML is a Pan-European initiative: and a Pan-Global and coordinated exercise.

Furthermore cooperation and information exchanges between country's Revenue and Excise agencies became part of a multi-national task-force aimed at stamping out tax evaders and cheats way back in the early 1980s: whereby the Inland Revenue (As it was) would hit a suspect with an assessment (Under Schedule 220 TMA, from memory) and invite the suspect to prove them wrong!

Using POCA to sanction miscreants is simply a natural extension: why pass another discrete law if one if there already?

Unless HPC' membership is big on Tax Evaders, then I'm sure most would support everyone paying their taxes.

In the same way I pay my fare when I use the trains: and hate little toe rag bilkers: as I despise those who drive cars with no insurance and tax.


Let's set the record straight here............

If a taxpayer is squeaky clean, then they can easily defend themselves by producing records which stack up.

The Revenue's stance on investigation for over 25 years has been assessment and then "Prove us wrong!"

A taxpayer (Let us assume Schedule E: i.e. PAYE) who enjoys another income from property and repeatedly fails to declare this on their tax return is wholly unable to defend themselves: "Didn't know I had to Guv!"

Ignorance of the law is no excuse. Consult a professional.

If and when one commences a new or additional business activity, which falls to tax under Self Assessment (Any case) then one has Six Months to advise HMRC.

Not exactly rocket science is it?

As a further matter of interest, if clients of my practice are unfairly accused or assessed, then we hand the client over to a top ten practice: who win every time and charge HMRC for their fees.

Unless, naturally, the client is a lying tax evading worm: then they wouldn't be a client!

laugh.gif

Edited by Venger

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It's not superbness more the ability to now quickly check the obvious. Land Reg says Fred Bloggs owns that house, but David Smith is paying the council tax.

Or Fred Bloggs owns the house and our rightmove / zoopla web scrap shows it being advertised at £800 a month rent..

Yes I know this is probably old news to us but its worth explaining it to others so they are not surprised when HMRC come knocking (and remember they want every penny they can get at the moment and will happily push people to suicide while trying to get it)..

Edited by eek

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That's pretty superb from the cross-checking of previous times. :)

It's my understanding - could be wrong - that Gov of recent years forced changes upon old departmental rivalries, to get this cross-checking all up and running - and that it's now very smooth.

And my guess is Big Data goes much further than that. .

And there was the recent BTL amnesty you also highlight - which still required BTLers to pay all their taxes of course, and as I understand it, an appropriate penalty. Recall reading an article in 2015 by a Chartered Tax Accountant, about the BTL amnesty. He seemed very much of the mind the tax authorities will have BTLers in view going forwards.

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That's pretty superb from the cross-checking of previous times. :)

It's my understanding - could be wrong - that Gov of recent years forced changes upon old departmental rivalries, to get this cross-checking all up and running - and that it's now very smooth.

And my guess is Big Data goes much further than that. .

And there was the recent BTL amnesty you also highlight - which still required BTLers to pay all their taxes of course, and as I understand it, an appropriate penalty. Recall reading an article in 2015 by a Chartered Tax Accountant, about the BTL amnesty. He seemed very much of the mind the tax authorities will have BTLers in view going forwards.

Its not all smooth. DWP don't have access to HMRC's data but if you worked next door to a bunch of incompetent cowboys you would probably have the same opinion..

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I would have though the records held by rent deposit schemes would be a good place to start.

Id be interested to know how many agents / landlords comply with this. Whilst I know it became a 'legal' requirement, it isnt in fact criminal, merely civil. And the punitive fines etc for non compliance, only apply if there is a dispute at the other end (end of tenancy) and the tenant reports the situation as such. Even then, as long as the agent/landlord returns the deposit in full, I understand no penalties are charged. So in short, if your landlord hasnt placed your deposit in a deposit scheme, you do in fact have a far better chance of getting it back in full (as any attempt to dispute and withold by the landlord could result in the 3 x deposit fine, so cheaper to return it than argue over £500 carpet issues), that is unless hes done a bunk with it. Even doing a bunk, its still civil, not criminal.

My thoughts would be, if a landlord has been avoiding HMRC for a significant time, hes hardly likely to be complying with the deposit scheme rules. Indeed, how many tenants actually check if their deposit has been paid in or not, and if not, what do they then do? Risk a possible eviction for rocking the boat?

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I would have though the records held by rent deposit schemes would be a good place to start.

I doubt (in fact I know) that data is not as accessible as the items I mentioned above....

Edited by eek

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You're all still underestimating the amount of landlords who don't believe they should be paying tax when they most definitely should be..

Spoke to some who haven't paid tax on their rental income for 7 years.. Not even a sniffle from HMRC

I hope you have reported them? You can do it here (you don't have to give your name); https://www.gov.uk/report-an-unregistered-trader-or-business

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Agreed. Any landlord who evades tax is not only helping to inflate the property bubble, they are also depriving the public purse of funds which could help the vulnerable in the economy.

If they have not paid tax for seven years, then they can hardly claim the victim card if they are caught. And it might put the fear into other dodgy landlords who fear their assets being seized.

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Agreed. Any landlord who evades tax is not only helping to inflate the property bubble, they are also depriving the public purse of funds which could help the vulnerable in the economy.

If they have not paid tax for seven years, then they can hardly claim the victim card if they are caught. And it might put the fear into other dodgy landlords who fear their assets being seized.

Meh.

All the evaded taxes from all rogue landlords collectively wouldn't even put a dent in Amazon's, Starbucks, Facebook or Googles UK tax avoidance.

And property bubbles are being inflated with vacuous policy from the politico, unregulated banks, and crooked interbank rate setters.

Yes, 'landlords' who don't play by the rules are chancers... but hardly the root of societies problems.

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