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Landlords and tax on rental income


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59 minutes ago, Mrs Bear said:

But how many ever get caught?  You hear of so many cases - it would seem that most are blithely confident of getting away with it long term.  If LLs were commonly caught out it would surely get around and put the frighteners on the non payers. Or at least some of them.

I don't suppose anything much would scare off the criminal/semi criminal slumlords who cram them in and demand cash in hand rent - except maybe massive fines and confiscation of their properties.  Or at least, the massive fines + being banned from renting properties ever again.  

The usual HMRC modus operandi would be to announce a crackdown with increased penalties after a certain date and support it with an advertising campaign........ ie shake the tree and see what falls out.

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19 minutes ago, Drummer said:

Most landlords dont fill in tax returns and are confident they wont get caught. Tbf, I'm confident they wont get caught either which is frustrating from an equality point of view. A teacher who has never done a self assessment in their life isnt going to start filling one in just because they have a BTL or two.

There are also those who complete tax returns but take mick with allowable expenses.

Thus, S24 is of little relevance for them.

 

No. You are wrong.

This is not cash in the hand gardening.

This is people who have a BTL mortgage (can be looked up by HMRC) and own an asset - house (can be checked).

And involves several 1000, so worh their time.

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1 hour ago, Orsino said:

Every tenant pays a deposit.

Every deposit is protected in one of only a handful of deposit protection schemes. It is an offence not to do so.

Match the registered deposit against declared rental income.

Job done.

Come on HMRC! What are you waiting for? Or is this queued up in your in-tray behind self-certified mortgage fraud?

I would be amazed if this was not already done, surely the data is available and it would be about 5 mins work to write a search to compare the names/addresses of LLs registering deposits with tax returns 

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11 minutes ago, Bruce Banner said:

The usual HMRC modus operandi would be to announce a crackdown with increased penalties after a certain date and support it with an advertising campaign........ ie shake the tree and see what falls out.

Wasn't this done a year or two ago.

The only person I know who thought he could keep his head down and avoid tax on his 3 BTLs received a letter telling him his return was being investigated. Cost him 5yrs back tax + 40% penalty plus 2k in accountants fees to sort out a proper return.

 

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3 hours ago, sideysid said:

Without trying to highlight any particular demographic, as I'm sure it's prevalent all over. 

My friend at work (who is Asian) and himself rents out properties on residential mortgages says that within the Asian community, its common practice to put properties in extended families names on residential mortgages. He doesn't know anyone that will be effected by the BTL changes.

I've heard the same from two independent sources. Renting each others properties in extended families and claiming any housing benefits to top up the rents. One of my sources admitted that overseas mortgages were used to further obscure ownership. 

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4 hours ago, Mrs Bear said:

I've often wondered, and yesterday heard this from daughter.  She has a friend who's a doctor, quite senior, and has some hefty expenses looming.  She also has a London flat she has rented out since moving to the area. 

She was discussing finances with another doctor, who asked whether she paid tax on her rental income.  She said yes, of course, she couldn't sleep at night otherwise. 

Other doctor's reply was basically, 'Then you're mad.  We never have.'  

This must be so common - I do wonder why on earth no govt. has cracked down on it. 

Who on earth is to know if you don't?  AFAIK there is no system at all for registering who rents what out, and the SA tax form asks only how many properties and what the rent is - it doesn't even ask for addresses. And who's to know even if you declared rent with a good percentage knocked off?  

 

Your non-tax paying doctor is quite right.  Until now.

Most professional people, such as doctors, don't pay tax on their rental income because they engineer their personal finances so there is no tax to pay.  It's a great scam, and totally legal. There is a whole accounting industry which will help you set it up, and you could be considerd mad not to do so.  In the past there was little point HMRC chasing up non-tax payers because most portfolios, no matter how small, wouldn't generate a tax bill anyway.  That has been the the whole point of BTL.  Until now.

Now, going forward, S24 totally changes the arithmetic.  Your doctor friend, with a former face-washing rental, now has tax to pay.  No amount of financial engineering will change that.  They are easy to find and identify.  And a prosecution for dishonesty will have them struck off.

This tax year ends in a few weeks.  There has been no extra jeopardy until now.  That changes when this years tax returns are filed.  The game is about to get very interesting!

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1 hour ago, spyguy said:

No. You are wrong.

This is not cash in the hand gardening.

This is people who have a BTL mortgage (can be looked up by HMRC) and own an asset - house (can be checked).

And involves several 1000, so worh their time.

What have i said that is wrong? I meant that s24 means little to most landlords because they dont declare rental income...which most dont!

Yes, HMRC can look up mortgages etc. but the evidence suggests they dont due to resources or whatever.

This is why s24 works in thoery but not in practice!

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2 minutes ago, Drummer said:

What have i said that is wrong? I meant that s24 means little to most landlords because they dont declare rental income...which most dont!

Yes, HMRC can look up mortgages etc. but the evidence suggests they dont due to resources or whatever.

This is why s24 works in thoery but not in practice!

Read lastlaugh's post.

HMRC did not bother with with IO BTL because their was no tax to chase.

HMRC will not spend any time pursuing people who do not owe tax!

Any of the old style LLs - paying for houses, cash down, will have paid tax and probably had an accountant.

The IO BTL are a different breed and account for most of the UK's LLs.

Come the new tax year they are suddenly going to be liable for tax. And their tax situation gets a lot of more complex.

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4 minutes ago, Drummer said:

What have i said that is wrong? I meant that s24 means little to most landlords because they dont declare rental income...which most dont!

Yes, HMRC can look up mortgages etc. but the evidence suggests they dont due to resources or whatever.

This is why s24 works in thoery but not in practice!

S24 hasn't even started yet!

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4 minutes ago, Drummer said:

What have i said that is wrong? I meant that s24 means little to most landlords because they dont declare rental income...which most dont!

Yes, HMRC can look up mortgages etc. but the evidence suggests they dont due to resources or whatever.

This is why s24 works in thoery but not in practice!

HMRC are a tax collecting part of government. UKGOV will give them all the resources they need to gather tax.

The way HMRC works is that it finds someone evading tax. Then looks for similar people.

It knows that IO BTL are due to pay tax next month. HMRC will get the tax owed.

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We will see, I do hope that those saying that HMRC will be on top of this are right.

I know a few firefighters with doing taxi/cash in hand second jobs on the side for years. They've never paid any tax on that work for as long as I've known them.

Lets just hope that the HMRC data is extensive and efficient enough to be able to weed the BTL landlords out. I work for a major public sector organisation and I certainly couldn't rely on them doing that here.

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13 minutes ago, sideysid said:

We will see, I do hope that those saying that HMRC will be on top of this are right.

I know a few firefighters with doing taxi/cash in hand second jobs on the side for years. They've never paid any tax on that work for as long as I've known them.

Lets just hope that the HMRC data is extensive and efficient enough to be able to weed the BTL landlords out. I work for a major public sector organisation and I certainly couldn't rely on them doing that here.

Again, doing Taxi shifts cash in hand is easy - its a small, cash transaction.

BTL requires mortgage - for the IO BTL kind.

And it requires regular transfer of several £100/property, every month.

Or, in a lot cases, DSS LHA payments.

 

 

 

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4 hours ago, fru-gal said:

I don't think HMRC or the Government really care about LLs paying tax, afterall, many of them are LLs and turkeys don't vote for Christmas. If they really cared there would be a national LL Register and lots of other things to link a LL to a property. Their "Big Data" is probably a bit of a "emperor's new clothes" and the whole tax take is based on scaring the middle classes who are generally honest and paying tax into believing that HMRC has all these powers and actually uses them when in reality it is much less hard work and less costly than going after those who don't declare and real criminals.

Makes me laugh how brunt of time/HPI makes HPCers (including the BTLers until recently) believe the BTL/LL side are the untouchables.

You still at it fru-gal?   It seems to be your favourite view points.  LLs as the magnificients who can't/won't be taken on by politicians/HMRC. 

Doom and gloom hard style, making the BTLers out as and wanting to cast aside some very impressive evidence of a major political move against the BTLers, and the fact that many of the BTLers are already in the pincer (Section 24).

So why Section24 announced to the utter shock of BTL forums / and BTLers posting about their 'financial oblivion' from it?

BTLers/Landlords being the big-bads with super-powers that 'HMRC the authorities don't want to take on anyway' and all the weight to be carried by the honest working stiff tenants forevermore.  

Section 24 (alongside changes to wear-and-tear now requiring receipts, to prevent skimming huge costs away as in previous years) changes everything about the BTLer tax position.   Exactly how @lastlaugh indicates.  

For all the many years (2000+) to 2017, so many BTLers have hardly had any tax to pay anyway, because of how they've been able (if they wanted to) arrange their finances to show zero profit from their selfish claiming on moar and moar BTLs.    Some of the biggest BTLers with multiple homes filing returns with £0 tax to pay, or just a £ token amount as a sporting gesture to HMRC.  All legal.  Tax held right down.  We've seen examples on the BTL forums.  And BTLer after BTLer has danced into that, also lulled themselves into the coarse ego positions (core voters / politicians don't vote Christmas turkey change against HPI/BTLers whatever) that HMRC will always leave alone.   Section 24 changes everything.


Also it doesn't matter if some BTLers even slip the net (into S24).  They won't be able to slip market forces from effects of Section24.  Section24 changes everything on the BTL/LL tax side position, and HPCers don't get it!   (Don't understand it.)  Total rents treated as income (not with finance costs deducted anymore), and then tapering tax relief.

 

On 2/10/2017 at 10:53 PM, Venger said:

Let's find out.  

Connect.  And Section 24.  

"Landlords and BTLers best friend" I am sure.. hehe. 

Also as a one-off, given I recently read this below... 

5UJF1LGf.jpg

 

 

On 2/10/2017 at 5:00 PM, fru-gal said:

Venger. Firstly, yes BTLers should be impacted somewhat. But there are plenty of cash in hand landlords who bought years ago (own outright) who have never declared their rental income and I imagine the all powerful HMRC have not managed to locate them, I even know a few people who claim they have never paid tax and never been caught by the powers that be. It took HMRC a non-tax related court case to find out that the former Tower Hamlets disgraced Mayor, Lutfar Rahman, had never paid tax on his rental properties and not declared them to HMRC. He had these properties for years (since 2008) before he was found out and I am sceptical about whether these would have come to light if it had he not been prosecuted for something else entirely (paying political canvassers). If someone in such a high profile position can cheekily get away with not thinking they need to declare such assets and income, it doesn't give me much faith that all the smaller fishes are declaring. It just shows how incompetent HMRC are imo.

http://www.telegraph.co.uk/news/uknews/law-and-order/12128815/Lutfur-Rahman-Judge-accuses-disgraced-former-mayor-of-mortgage-fraud-and-tax-evasion.html

They still got him.

Edited by Venger
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A lot of BTL's are going to need an accountant for the first time this year.

I can imagine the question -:

FCA - So, Mr Duck (or can I call you sitting?), why are you here?

SD - No idea. Never made a profit (on paper, snort!), so no need for a tax return or anything like that, but some interweb bloke in Malta said that things had changed and I might now need help to carry on paying no tax. 

FCA - Ok. Let's take a look. This mortgage of £200k, what is it for?

SD - One of my BTL's

FCA - How much did you pay for it?

SD - £100k - Proper businessman, me. Bet you don't get many as successful as moi in here too often.

FCA - So why a £200k mortgage?

SD - Remortgage, wasn't it. Lovely jubbly. Got to keep the mortgage up and profit to zero - But what is it to do with you?

FCA - Which you used to invest in another property, right?

SD - Nah. I needed a new Rangie and Mrs SD fancied a trip on the old P&O and a new kitchen. That Farrow and Ball point ain't cheap - I think you will have the receipt in the papers marked HMO No. 3

FCA - Oh dear.

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I agree to all the replies on IO BTL mortgages. Thats all well and good for the ignorant stupid t**ts not knowing whats coming and how the changes will effect them.

What I want to know is whats in place for chasing up BTL mortgages disguised as residential which I suspect a lot of the London housing bubble consists of?

Edited by sideysid
.
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27 minutes ago, CunningPlan said:

A lot of BTL's are going to need an accountant for the first time this year.

I can imagine the question -:

FCA - So, Mr Duck (or can I call you sitting?), why are you here?

SD - No idea. Never made a profit (on paper, snort!), so no need for a tax return or anything like that, but some interweb bloke in Malta said that things had changed and I might now need help to carry on paying no tax. 

FCA - Ok. Let's take a look. This mortgage of £200k, what is it for?

SD - One of my BTL's

FCA - How much did you pay for it?

SD - £100k - Proper businessman, me. Bet you don't get many as successful as moi in here too often.

FCA - So why a £200k mortgage?

SD - Remortgage, wasn't it. Lovely jubbly. Got to keep the mortgage up and profit to zero - But what is it to do with you?

FCA - Which you used to invest in another property, right?

SD - Nah. I needed a new Rangie and Mrs SD fancied a trip on the old P&O and a new kitchen. That Farrow and Ball point ain't cheap - I think you will have the receipt in the papers marked HMO No. 3

FCA - Oh dear.

Very funny I have to say all the BTLs I know are fine.

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19 minutes ago, CunningPlan said:

A lot of BTL's are going to need an accountant for the first time this year.

I can imagine the question -:

FCA - So, Mr Duck (or can I call you sitting?), why are you here?

SD - No idea. Never made a profit (on paper, snort!), so no need for a tax return or anything like that, but some interweb bloke in Malta said that things had changed and I might now need help to carry on paying no tax. 

FCA - Ok. Let's take a look. This mortgage of £200k, what is it for?

SD - One of my BTL's

FCA - How much did you pay for it?

SD - £100k - Proper businessman, me. Bet you don't get many as successful as moi in here too often.

FCA - So why a £200k mortgage?

SD - Remortgage, wasn't it. Lovely jubbly. Got to keep the mortgage up and profit to zero - But what is it to do with you?

FCA - Which you used to invest in another property, right?

SD - Nah. I needed a new Rangie and Mrs SD fancied a trip on the old P&O and a new kitchen. That Farrow and Ball point ain't cheap - I think you will have the receipt in the papers marked HMO No. 3

FCA - Oh dear.

:lol:

I hear from work colleagues discussing ways of avoiding it and boasting how clever they are. I dont know all of their individual positions, but its very obvious that they have left loads of trail  for HMRC to follow up, also most of them are digital and easy to get access. 

In any given area a minority of high leverage BTLers-  the most easy target, getting caught would be sufficient to bring down the paper value of many other disguised LLs.

 

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2 hours ago, Drummer said:

What have i said that is wrong? I meant that s24 means little to most landlords because they dont declare rental income...which most dont!

Yes, HMRC can look up mortgages etc. but the evidence suggests they dont due to resources or whatever.

This is why s24 works in thoery but not in practice!

HMRC has everything it needs.    

As I understand it, even Letting Agents need to let HMRC know info on BTLers (in some circumstances).

And any LLSs/BTLers who seek to slip the HMRC net going forward (into S24) at risk of major fines.  Things getting serious (S24) and any landlord (with tax to pay) who thinks they can get away with it, always got to be uneasy about their position, as things get underway HMRC side.  

The game is afoot.  LLs/BTLers have not really had much tax to pay (2000-2017), because of how they engineered their finances.  'Most landlords don't declare'  - So your evidence is no evidence at all (apart from casting BTLers/LLs as the invincibles).... and even in that time HMRC have followed up for small amounts of tax owed from BTL side.

Section 24 just about to begin ffs, and hpcers moaning it won't have an effect (although always learning of more HPIers/BTLers on forum, riddled with it, and their big VI to play down any HPC risk + white flag waving surrenderers).  

2 years of BTLers squeal letters about S24 did not have any effect.  Gov didn't turn.  Well apart from seeing SDLT surcharge also brought in by HM Treasury in the Autumn Statement 2015.   BTLers as 'Section24... must be a mistake... let's get it overturned' - to cold response from the authorities and then double whammy.  

 

On 8/3/2015 at 11:55 PM, Bland Unsight said:

This is a war. Older cohorts have made common purpose with shit banks to extract rents from younger cohorts. In the long run the status quo of allowing an idiotic buy-to-let sector was always going to be unwound because it is politically and economically unsustainable. The Conservatives, god bless them, are doing it now.

George Osborne has sharpened an unpleasant looking knife and then with merciless calculation slid it into the sector somewhere between its groin and its belly button.

He then smiled pleasantly because he is really, really good at politics and promised that it wouldn't reach your chin till 2020 and then he started moving it upwards. Again I say, "Good luck with that".

I am signed off on the need to fight. George Osborne has this. But I will continue to fight because all of this matters. As Byron so eloquently said, there are children unborn because of this idiocy. Hence, thanks for the feedback guys, but if all that you have is that Bluke Shittallker is annoying and you'd prefer a civilized gentlemen's club where we speculate on house prices as if none of it mattered, that ship sailed.

Shoot down the arguments with evidence and reason. If all you have is the idea that you'd rather I wasn't so chippy, you are in for a long wait for a train that isn't coming.

 

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I've learnt a lot from reading BTL forums this past couple of years. It's always interesting to hear about all the various tax avoidance schemes and different approaches to S24 that some of them will be taking. A few of those landlords sure do like to talk...

;)

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22 minutes ago, iamnumerate said:

Sorry I should have said that they are all happy and relaxed about these changes - I am not sure if they are stupid or have made careful calculations and think they are going to be ok.

Okay.  I am sure that is true for many a landlord.  Either they believe it to be so, or it actually is.

S24 is still a big deal for many a BTLer (2 million of them? - with control of 1 in 5 houses).

Helped friends move to a new rental and I have good reason to believe their landlord owns 4 rental houses outright (5 with his own house).  Say £400K a house, in this market.   Can't read the tides by watching how a few waves break - some BTLers who won't be affected/less affected by S24 - and a tiny spark can have a big effect.

Many BTLers will be found out (S24) and the questions are how that affects wider market.   4 BTL outright owner may have good reason to cash in when going is good.

On 3/1/2017 at 9:13 PM, A third of everything said:

House I lived in last was £1350 a month to rent and sold at £385,000 though I assume record low interest rates now would make a difference in the comparison. Funnily enough our landlord sold for 3 reasons - s24, extra home stamp duty, and because he thought if he waited he wouldn't get as much for it.

(Although the same guy is pushing and falling over to buy at big prices now - with all his viewings, desire to see SDLT lowered so he can pay more/higher prices - and sees HPC more as about 'preying on misery' rather than most owners/BTLers sat on £Trillions in equity).

Anything that changes to tilt from hold to sell, is welcome by me.  If BTL sells for £300K (from peak value £400,000) it doesn't leave the identical house next door worth the peak £400K... well not when a few such sales trend in an area.  It brings all values down.   

Values are found at the margins (unless we have loads put through auctions and market values less affected.....   seemed to be part of the deal in 90s HPC, with Wilsons living in auction rooms, buying, and remortgaging the following week at much higher valuation... with sort of two markets in play....both HPC markets but one far steeper that did not impinge as heavily on the other).

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