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bimlam

Confusion over buy to let

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Hi

I am reading los of confusing things about the future of BTL.   Can someone tell me once and for all if it is true that tax will be applied to income, rather than profit, from 202?  Various online articles claim that after 2020 everyone's tax bills will go up because they will have to pay tax on the entire rent received.  However my tax adviser keeps telling me that there are no changes planned and I will still be able to claim relief and only pay tax on net profit!   

Which is correct?

Also, if my advisor is wrong and I will have to pay tax on full rental income, my plan would be to switch from an interest only mortgage to a full repayment mortgage as there would be no point of using the interest to offset tax and then I can just get on with paying off the capital.  Does that sound logical?

Thanks

Bimlam.

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30 minutes ago, bimlam said:

 

I am reading los of confusing things about the future of BTL.   Can someone tell me once and for all if it is true that tax will be applied to income, rather than profit, from 202?  Various online articles claim that after 2020 everyone's tax bills will go up because they will have to pay tax on the entire rent received.  However my tax adviser keeps telling me that there are no changes planned and I will still be able to claim relief and only pay tax on net profit!   

Which is correct?

Also, if my advisor is wrong and I will have to pay tax on full rental income, my plan would be to switch from an interest only mortgage to a full repayment mortgage as there would be no point of using the interest to offset tax and then I can just get on with paying off the capital.  Does that sound logical?

Thanks

Bimlam.

Hi,

you will be taxed on gross rent, then can deduct 20% of interest payments. Capital repayment is not tax deductible in any way

Edited by Fatmanfilms

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1 hour ago, bimlam said:

I am reading los of confusing things about the future of BTL.   Can someone tell me once and for all if it is true that tax will be applied to income, rather than profit, from 202?  Various online articles claim that after 2020 everyone's tax bills will go up because they will have to pay tax on the entire rent received.  However my tax adviser keeps telling me that there are no changes planned and I will still be able to claim relief and only pay tax on net profit!   

Which is correct?

Your "tax adviser"?

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Your advisor is totally wrong. The tax changes HAVE ALREADY STARTED. The changes are being phased in over four years. 2017-18 is the first year the interest relief is being removed - you are already required to pay income tax on the rental income received and the amount of interest costs you can deduct from that income HAS ALREADY REDUCED.

You need to do two things:

  1. Fire your 'tax advisor' and hire an accountant
  2. Sell your buy to let property asap

The housing market is on the brink of a collapse - many landlords like you are already aware of the tax changes and have done the calculations and worked out that their investments are no longer generating an income for them. On top of this the stagnating housing market means that capital gains can no longer be guaranteed either. 

Many landlords are coming to the conclusion that they're investments are no longer acumulating in value and are selling up. The more people who are selling the lower the prices will be - you need to sell up now so you can get out while you're ahead. 

 

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40 minutes ago, anonlymouse said:

Your advisor is totally wrong. The tax changes HAVE ALREADY STARTED. The changes are being phased in over four years. 2017-18 is the first year the interest relief is being removed - you are already required to pay income tax on the rental income received and the amount of interest costs you can deduct from that income HAS ALREADY REDUCED.

You need to do two things:

  1. Fire your 'tax advisor' and hire an accountant
  2. Sell your buy to let property asap

The housing market is on the brink of a collapse - many landlords like you are already aware of the tax changes and have done the calculations and worked out that their investments are no longer generating an income for them. On top of this the stagnating housing market means that capital gains can no longer be guaranteed either. 

Many landlords are coming to the conclusion that they're investments are no longer acumulating in value and are selling up. The more people who are selling the lower the prices will be - you need to sell up now so you can get out while you're ahead. 

 

40963709-Filter-funnel-symbol-Stock-Vect

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Bimlam, out of interest do you know any other landlords who only have one buy to let? 

Only various analyses suggest that the vast majority of landlords only own one buy to let. Thus, if the level of ignorance you show is common then we should expect a deluge of properties onto the market within the next year or so.

Maybe a carefully worded Daily Mail article could open the floodgates for us.

We definitely haven't reached 'peak moan' yet, that's for sure. 

Edited by spacedin
..

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8 hours ago, bimlam said:

I am an owner occupier and I have one BTL as well.  Thanks.

According to this following thread from 2011 you planned on owning one house, going abroad and renting that house out while away, then moving into it when you return. http://www.housepricecrash.co.uk/forum/index.php?/topic/163365-first-purchase-this-summer-in-london/#comment-2980330

So since then you you did that and got a BTL.

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11 hours ago, bimlam said:

 

As said above you're already building up tax liabilities that are greater than you have previously paid. You need to get some proper advice from an accountant as to how significantly that is likely to affect you. If the margin on your investment is not high under the old tax rules then it is certainly possible that it goes from profitable to loss-making over the next few years as the tax changes kick in.

 

A number of landlords are going to be bankrupted by the changes imo. Generally speaking these are likely to be those with high levels of leverage and multiple properties. But even with only one BTL you need to understand the risk you are running if the tax changes put you in a situation that you cannot pay the tax liabilities that are already building up. HMRC will come after all your assets in that scenario including your primary residence. 

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On 5/13/2017 at 6:58 PM, Arpeggio said:

According to this following thread from 2011 you planned on owning one house, going abroad and renting that house out while away, then moving into it when you return. http://www.housepricecrash.co.uk/forum/index.php?/topic/163365-first-purchase-this-summer-in-london/#comment-2980330

So since then you you did that and got a BTL.

Like that Guardian article about that Hackney landlord who went to Vietnam to live,  but was appalled that his 1st floor flat had a business open up underneath it.

That business being:

A vietnamese restaurant

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18 hours ago, Tapori said:

Like that Guardian article about that Hackney landlord who went to Vietnam to live,  but was appalled that his 1st floor flat had a business open up underneath it.

That business being:

A vietnamese restaurant

Rather a colonial British Empire attitude there. Foreign culture is for him, while he patronizes the little Vietnam people with his Western money. Not the other way around.

Someone should tell him to f*ck off back to 1780.

4b996b22161840e4635ebcb74444f64c.jpg

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Just now, Arpeggio said:

Rather a colonial British Empire attitude there. Foreign culture is for him, while he patronizes the little Vietnam people with his Western money. Not the other way around in any way.

Someone should tell him to f*ck off back to 1780.

4b996b22161840e4635ebcb74444f64c.jpg

Hope they open a curry house next door too.

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S24 and the new tax is a beautiful piece of taxation. It is very individual and possibly (if you hold one property and don't have much other income) have limited impact. But it completely changes your tax return and your declared income. Impacts on benefits, maintainance payments and for many the tax you pay. 

So you do add the rent (less expenses but not mortgage interest) to your other INCOME for the year. That is your income for benefits, maintainance and working out your tax rate.

You work out the tax due you and INLY THEN deduct 20% of the interest you have paid off your tax bill. 

It sounds almost the same and it almost is....but the subtle difference is huge. It pushes some basic rate tax payers into the higher rate and it make BTL much less attractive. 

At best this make things inconvenient for you, it makes me change my plans....but those leverage LLs with lots of houses it scuppers completely. 

Pay your debt off....pay it off fast.

'Pretend' debt is a real thing with consequences and assume BoE interest rates are 7% again. The contempt many have shown for debt is proportionate to the impact this will have on each individual. 

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13 hours ago, eric pebble said:

I am seriously, seriously interested:  Does this guy - ]http://www.bbc.co.uk/programmes/p057v67s  pay any tax??  Is he going to be absolutely sh*t on with this new btl tax????

Couldn't bear to watch the programmes, but can't help wondering whether they'll be a gift on a plate with parsley on top, to HMRC.  

I've  long thought that people so desperate to be on telly that they'll expose themselves like this, must be a combination of thick and vain, and in this case thus very likely to be 'careless' or profess to have been conveniently unaware of tax liabilities. Seems to me that their main concern has been to brag to prime time viewers about their BTL 'empires'.  So if any of them get put through the taxman's wringer as a result, serve them bloody well right. 

 

Edited by Mrs Bear

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12 minutes ago, Mrs Bear said:

I've  long thought that people so desperate to be on telly that they'll expose themselves like this, must be a combination of thick and vain,

 

Yes but they'll hope for a future as celebretees when pwopertee fails :lol:

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On 8/27/2017 at 10:59 AM, Option5 said:

Yes but they'll hope for a future as celebretees when pwopertee fails :lol:

:D  Yup.  We live in a mad, mad world.

On 8/27/2017 at 10:59 AM, Option5 said:

Yes but they'll hope for a future as celebretees when pwopertee fails :lol:

 

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