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

[Drummer]

The tax they pay is unenforced, so effectively optional, so nothing to see here.

[Mapatasy]

Landlords’ stamp duty pain twice as bad as feared hoped

http://www.telegraph.co.uk/business/2017/03/11/landlords-stamp-duty-pain-twice-bad-feared/

[ChumpusRex]

9 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

The property has to be sold to the company. This would usually incur legal fees charged by the conveyancer.

This can trigger a capital gains tax liability. 

If there is finance involved, the rates available for a ltd company may be substantially higher compared with the rates available for a private individual - typical rates are in the 3.5% range compared to private BTL which in prior years were available at under 2.0%. Additionally, there may be early repayment fees, etc.

There is a 3% stamp duty additional rate on a Ltd company purchasing a dwelling.

If the landlord has a portfolio, then transferring the whole portfolio will trigger the linked-transactions provisions for stamp duty, and push the rate up dramatically. (e.g. purchasing a single property of £120k would incur a 0% SDLT liabilty, giving a total liability of 3%. Buying a portfolio of 10 120k properties, would be taxed as a £1.2m transaction, giving a total liability of approx 8.3%).

[Sancho Panza]

1 hour ago, ChumpusRex said:

The property has to be sold to the company. This would usually incur legal fees charged by the conveyancer.

This can trigger a capital gains tax liability. 

If there is finance involved, the rates available for a ltd company may be substantially higher compared with the rates available for a private individual - typical rates are in the 3.5% range compared to private BTL which in prior years were available at under 2.0%. Additionally, there may be early repayment fees, etc.

There is a 3% stamp duty additional rate on a Ltd company purchasing a dwelling.

If the landlord has a portfolio, then transferring the whole portfolio will trigger the linked-transactions provisions for stamp duty, and push the rate up dramatically. (e.g. purchasing a single property of £120k would incur a 0% SDLT liabilty, giving a total liability of 3%. Buying a portfolio of 10 120k properties, would be taxed as a £1.2m transaction, giving a total liability of approx 8.3%).

Thanks Chumpus,informative as ever.I was unaware that portfolios were treated in that manner.

[mrtickle]

14 hours ago, AvoidDebt said:

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. 

Surely Fergus is at no. 1...

 

[Si1]

5 hours ago, mrtickle said:

Surely Fergus is at no. 1...

 

Surely the btlegraph could generate this story simply by combining their past btl landlord case study w#nkfests with a new headline? I'm sure they've covered the Wilsons, HMO daddy, and others in the time.

[StainlessSteelCat]

16 hours ago, Drummer said:

The tax they pay is unenforced, so effectively optional, so nothing to see here.

That's my belief too. My "research" suggests that probably 80% of BTLers don't pay any tax. I suspect the average accidental landlord is wilfully ignorant of the need. 

[Craig_]

On 3/13/2017 at 6:29 AM, Sancho Panza said:

'

 

That table surely shows that landlording will be taken over by institutions, rather than individuals, which in my eyes doesn't really make the situation any better.

[dgul]

On 13/03/2017 at 6:29 AM, Sancho Panza said:

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”.

'

 

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

 

They just can't see that it isn't 'an unfair tax rise' but 'the removal of a tax benefit that shouldn't have been allowed in the first place'. 

These people should first do a bit of research to identify all the situations where private individuals get tax relief on their interest payments, then come back and reassess their attitude.

[dgul]

On 13/03/2017 at 7:51 AM, spyguy said:

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?

 

 

They'll introduce basic-rate miras instead.

By my estimates this will be mentioned next year, and introduced 2019 ready for tax benefits to hit wallets by election 2020.

[LC1]

Her headings in that table made me laugh - "with any number of properties from 1 to more than 100".

Er, so that's any number of properties then?

No need to show off that you can count to more than 100, Dr Ros.

[crazypabs]

On ‎13‎/‎03‎/‎2017 at 9:09 AM, AvoidDebt said:

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. 

Not sure if this is Dr Beck, but the pieces kind of fit.

https://beta.companieshouse.gov.uk/officers/8N7eQQZBBb7uhGRPKM998VfjOSM/appointments

Occupation: School Teacher

Director of HTB Consult Ltd

https://www.ricsfirms.com/office/059203/htb-consult-limited

If her husband, Philip has a business called HTB (possibly Help To buy) don't you think that his wife lobbying the government with a letter 72pages (maybe not that long) long on why section 24 is so bad for the market is a bit of a conflict of interests?

Im not entirely sure this is the right person but it is all very coincidental.

 

[Lavalas]

5 hours ago, crazypabs said:

Not sure if this is Dr Beck, but the pieces kind of fit.

https://beta.companieshouse.gov.uk/officers/8N7eQQZBBb7uhGRPKM998VfjOSM/appointments

Occupation: School Teacher

Director of HTB Consult Ltd

https://www.ricsfirms.com/office/059203/htb-consult-limited

If her husband, Philip has a business called HTB (possibly Help To buy) don't you think that his wife lobbying the government with a letter 72pages (maybe not that long) long on why section 24 is so bad for the market is a bit of a conflict of interests?

Im not entirely sure this is the right person but it is all very coincidental.

 

Worth cross referencing this with the Rent Smart Wales landlord register.

[Venger]

On 3/13/2017 at 9:15 AM, 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.

Sorry to be slow getting back to you on this Lavalas.

I seem to recall that.  And, as per your follow up post, we only assumed it was very likely to be her in that Guardian comment, but not certainty of that.

Had a quick search but not turned up anything useful (and we couldn't be certain that newspaper comment was her anyway) apart from a very funny post from you about Bosher and 'sophistry'.    Athough I only use code-names for all the BTLers (to limit risks if I get carried away) so am not going to link to it.

Going further back she set out some info about her position, and one HPCer speculated to her overall position.  I seem to remember thinking she should get out with lots of money if she sold up, even after a HPC, and would still be top-flight wealthy.  That overall she should measure her position (in event of S24/HPC) against others in society.   Although later on the P118 she gave a clue on how she was accounting her overall position, and then another HPCer crunched the numbers in altogether less generous way.  

So all-in-all, can't be of help there.  Don't know the position.   I expect to be reading BTL her BTL letters to authorities for quite some time to come.