Jump to content
House Price Crash Forum
Sancho Panza

How private landlords’ tax bills will rocket after ‘unjust legislation’

Recommended Posts

Property Industry Eye 10/3/17

'There will be an enormous leap in tax bills for private landlords when tax reforms kick into place.

Dr Ros Beck, a private landlord, has done research which shows that the tax bill could almost triple – and that landlords will be effectively paying at a tax rate of 67%.

Her calculations are said to have been independently verified.

From next month, private landlords will have their current ability to offset mortgage interest against tax gradually phased out by Section 24 of the Finance Act (no 2) Act 2015.

This legislation followed last year’s Spring Budget, the last to be introduced by then Chancellor George Osborne.

By April 2020, the change will be fully phased in and landlords will no longer be able to claim tax relief against their borrowing costs. Instead, they will be issued with a basic rate tax deduction.

The new tax regime will not just affect mortgage costs but other loans – for example, overdrafts and loans to buy furniture.

It will apply only to private landlords, and not to those operating in a company structure.

Dr Beck said of her latest number crunching: “I would now urge people to lobby both Philip Hammond and Gavin Barwell and show them this very clear table which provides incontrovertible evidence that Section 24 must go.”

She described Section 24 as the “unjust legislation that will make the UK housing crisis much worse”.

ros.jpg'

 

The only problem with this sort of article is that I wet myself laughing.

The penny appears to be dropping although a lot of the LL's I know appear clueless about S24

 

Share this post


Link to post
Share on other sites

Looks like their rents will rise campaign is going up in smoke too. Daft c**ts should have sold by now but still in ranty letter writing mode...

 

UK average annual rents fall for first time in six years

Buying frenzy ahead of 2016 stamp duty hike pushed up supply of new homes for letting by 10%, Countrywide figures show

https://www.theguardian.com/business/2017/mar/13/uk-average-annual-rents-fall-stamp-duty-hike-letting

Share this post


Link to post
Share on other sites
28 minutes ago, btl_hater said:

I really hope we hear a story about Ros filing for bankruptcy a couple of years months from now. No doubt she would be "lobbying" for a bail out.

 

Share this post


Link to post
Share on other sites

Either the underpinning research or the reporting is pants here. A nicely laid out table but no details on how these figures have been arrived at or assumptions being made.  

Share this post


Link to post
Share on other sites
3 minutes ago, maffo in oxford said:

What are the barriers/penalties regarding a private LL incorporating? A brief summary of the differences between the two would be great :)

They need to sell the property to the limited company at the current market price. That crystalizes their capital gain "profits" which then need to be paid to HMRC...

Of course the problem with that for the Fool118's is that they don't have any equity in a house as its always been used to purchase the next house in the pyramid.

 

Share this post


Link to post
Share on other sites
7 minutes ago, One-percent said:

Either the underpinning research or the reporting is pants here. A nicely laid out table but no details on how these figures have been arrived at or assumptions being made.  

Can I go for both - its why they won't get anywhere as its all words without an actual argument to back it up.

At a minimum that table needs income from rental before interest costs and then interest costs. You then get to watch as income (from April) magically crosses one of the penalty lines (£50,000 - £60,000 child benefit, £100-£100,000 personal allowance, £150,000 45% tax and pensions)..

1 minute ago, hotairmail said:

They are still getting basic rate relief on their loans.

Perhaps she should write about the unfairness of that over first time buyers?

Oh and drop the 'Dr' moniker love....It can't be related to landlording, who knows what it's for and where it's come from. It doesn't impress anyone and you're bringing it into disrepute.

And hopefully that will  be fixed come 2019.....

Share this post


Link to post
Share on other sites

Is it too much to expect her to provide some basis for that calculation? Looks like absolute codswallop designed to scare a few btlers into action to me but I have no real desire to give property weekly or whatever a click to find out. 

Share this post


Link to post
Share on other sites
14 minutes ago, monkeyprojects said:

They need to sell the property to the limited company at the current market price. That crystalizes their capital gain "profits" which then need to be paid to HMRC...

Of course the problem with that for the Fool118's is that they don't have any equity in a house as its always been used to purchase the next house in the pyramid.

 

Does the company also have to pay stamp duty?

Share this post


Link to post
Share on other sites

I think basic rate needs to be dropped ASAP too.

Level playing field and all that.

The dynamics of BTL loans will et more interesting.

One, Basel 3 will cause the banks to hold more capital, increasing the cost of them.

Two, more IO BTL will default on their  loans, casing risk profile to rise, causing higher rates, causing more LL to default, etc.

I stand by my claim from the early 2000s - no regulated should be touching IO BTL. In nature, tIO BTL are nothing more than commercial bridging loans and need to be priced like them.

Non amortising commercial loans WTF were banks + regulators thinking FFS?

 

 

Share this post


Link to post
Share on other sites
6 minutes ago, ThePiltdownMan said:

Does the company also have to pay stamp duty?

yep - forgot that bit (and its automatically got the 3% secondary property addition as there is no primary residency discount)..

It's why you end up with made schemes like Busta's trust solution (yep you can annoy both your bank and HMRC at the same time - so both people go after you)..

Share this post


Link to post
Share on other sites
4 minutes ago, monkeyprojects said:

yep - forgot that bit (and its automatically got the 3% secondary property addition as there is no primary residency discount)..

It's why you end up with made schemes like Busta's trust solution (yep you can annoy both your bank and HMRC at the same time - so both people go after you)..

Busta should be OKish .. as long we dont leave the EU.

Im kidding. It was a daft idea.

Share this post


Link to post
Share on other sites

"Dr Ros Beck, a private landlord, has done research "

 

That implies it had some kind of academically grounded basis. It hasn't.

Share this post


Link to post
Share on other sites

I wonder who's got the most fckd up portfolio in the country. Dr Ros could be a contender as she's making the most noises. Has she ever revealed her actual position? 

Would absolutely love to see a buzzfeed style: top 10 most fckd up BTL portfolios in the country. Perhaps an idea for any journos that lurk around here. I'd personally pay to bypass a paywall to read that. 

Edited by AvoidDebt

Share this post


Link to post
Share on other sites

Ros gave some detail on her predicament in a guardian article around Dec 15 but generally she doesn't give much away, although I'm guessing her 'research' doesn't require too many questionnaires...

I can't find the link again but @Venger has kindly found it in the past.

Share this post


Link to post
Share on other sites
2 minutes ago, Lavalas said:

Ros gave some detail on her predicament in a guardian article around Dec 15 but generally she doesn't give much away, although I'm guessing her 'research' doesn't require too many questionnaires...

I can't find the link again but @Venger has kindly found it in the past.

Actually, that article gave some figures and quotes from a Welsh landlord. Any assumptions are all mine.

Share this post


Link to post
Share on other sites
2 hours ago, maffo in oxford said:

What are the barriers/penalties regarding a private LL incorporating? A brief summary of the differences between the two would be great :)

In short, they need to pay so much money to remortgage, take the CGT hit, etc.

Not change in hell for IO BTLs.

Share this post


Link to post
Share on other sites
2 hours ago, maffo in oxford said:

What are the barriers/penalties regarding a private LL incorporating? A brief summary of the differences between the two would be great :)

If you're a cash owner then none.

 

If you have a mortgage(s),then the big problem will be converting your BTL mortgages into commercial loans.Most BTLers are unaware that their BTL loans are underwritten by both their personal income and also the equity they have in their own home.

 

Suffice to say the bank will want compensating for the extra risk either via reducing LTV or increasing IR's.

For most leveraged BTLers,incorporating just isn't an option.

 

Share this post


Link to post
Share on other sites
3 hours ago, One-percent said:

Either the underpinning research or the reporting is pants here. A nicely laid out table but no details on how these figures have been arrived at or assumptions being made.  

Going by the tax rate/net tax paid figures the rental income is £50k. Even with the complete removal of interest deductibility and assuming they're already a higher rate tax payer through other work, I can't see how their tax rate would jump to 67%?

Share this post


Link to post
Share on other sites
5 hours ago, One-percent said:

Either the underpinning research or the reporting is pants here. A nicely laid out table but no details on how these figures have been arrived at or assumptions being made.  

Yes, the table is garbage without knowing the basics eg gross rent and number of properties. Given the income before taxation  but after other expenses, notably the interest expenses that they are getting stroppy about, appears to be based off £50,000, I think the gross rent received must be in the region of £150,000 with interest charge of circa £80,000. Might be wildly incorrect. I'd say that, subject to accuracy, does not represent any sort of 'normal' landlord. Fancy that.

The 118 lobby's dirty secret/sleight of hand is that they are desperate to try and convince other landlords that they are just like them, when the largest LLs on 118 specifically embarked on a very aggressive model of hoovering up properties with IO loans, which was entirely facilitated by an environment of idiotic credit advancement leading to strong HPI.

There are plenty of landlords, eg so called 'accidental' landlords, who didn't subscribe to this business 'model'. They are not above criticism either in my view but for (some) different reasons. Also unleveraged types who must be laughing their **** off.

Edited by The Knimbies who say No

Share this post


Link to post
Share on other sites
6 hours ago, Sancho Panza said:

The only problem with this sort of article is that I wet myself laughing.

The penny appears to be dropping although a lot of the LL's I know appear clueless about S24

 


Well I assume the way they are being bought round here that people just don't understand what will happen.
Either that or some people pee money.

Share this post


Link to post
Share on other sites

The peek on that buy to let sales chart, google it, makes me laugh and cry every time. It's off the chart. Zero thought or strategy just to hold back and see how the stamp duty changes pan out, brexit vote develops or affects of S24. No. Must buy now before April 1st 2016, and 'save' the 3% extra stamp duty. Total lemmings with toilet brush brains... When the market collapses on these fckwits it will be worth the 20 year BThell pain. 

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

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   81 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    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.