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'Buy-to-let tax changes will cost me £20k a year – this is what I'm going to do'

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Nah, they will burn the flat/house down.

All of them are below market value anyway. And not leveraged, and damn 20k cost out of £9M, can we crowdfund the poor guy.

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42 minutes ago, Freki said:

Nah, they will burn the flat/house down.

All of them are below market value anyway. And not leveraged, and damn 20k cost out of £9M, can we crowdfund the poor guy.

Don't joke, the assumption is that without our BTL saviours the houses they will be forced to sell will simply disappear anyway, like something out of Harry Potter or make the housing situation in the UK "worse" by a sudden influx of cheap housing on the market... logic isn't in the BTL empires lexicon.

Edited by JustAnotherProle

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Posted this article on the BTL thread few days ago, key quote before you get all sympathetic:

Quote

Mr Hughes believes many of the changes will be reversed. He explained: “Basically what this has done is destabilised the rental market and that will need to be addressed.” He cited the example of Ireland, which recently overturned similar changes first introduced in 1998.

 

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52 minutes ago, Barnsey said:

He cited the example of Ireland, which recently overturned similar changes first introduced in 1998.

Great, so he's got 20 years to wait then.

It may well be reversed, when the BTLrs are back in their box and property prices are back to sensible levels.

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Quick question from reading article if properties are held in a company they can still write off the interest part?

but they have to pay stamp duty and capital gains to move properties to a company? Which are one off charges.

is that correct?

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2 minutes ago, RomfordDon said:

Quick question from reading article if properties are held in a company they can still write off the interest part?

but they have to pay stamp duty and capital gains to move properties to a company? Which are one off charges.

is that correct?

Correct, the only real concern is how much can you sell below "current market value" to avoid the taxes and not being caught by HMRC. I am totally unaware of this.

@spyguy I think also like to remind that from the bank perspective you are expected to start paying higher interest. 

It makes sense since you go from being an unlimited company, basically there is no limit to how far the bank can skin you to recover their money, to a limited company. The bank can only repossess this collateral and any other assets that belongs to the limited company. So it is riskier for the bank.

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8 minutes ago, RomfordDon said:

Quick question from reading article if properties are held in a company they can still write off the interest part?

but they have to pay stamp duty and capital gains to move properties to a company? Which are one off charges.

is that correct?

Yes as I understand it. Of course they will also have to change their loan to a commercial one which will have a much higher rate of interest.

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8 minutes ago, RomfordDon said:

Quick question from reading article if properties are held in a company they can still write off the interest part?

but they have to pay stamp duty and capital gains to move properties to a company? Which are one off charges.

is that correct?

There's a lot more cost in running a company.

 

The whole IO BTL where individuals borrowed 100ks all at the same rate as an OO was  stupid glitch in banking. Gormless building societies lending out money which should have been charged at commercial bridging loan rates.

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Reads like a twisted version of monopoly only made possible by the banker looking the other way whilst their bank notes get borrowed to ensure a thoroughly diversified property portfolio. Would be interesting to know level of leverage, surely must be very high.

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7 hours ago, Freki said:

Correct, the only real concern is how much can you sell below "current market value" to avoid the taxes and not being caught by HMRC. I am totally unaware of this.

@spyguy I think also like to remind that from the bank perspective you are expected to start paying higher interest. 

It makes sense since you go from being an unlimited company, basically there is no limit to how far the bank can skin you to recover their money, to a limited company. The bank can only repossess this collateral and any other assets that belongs to the limited company. So it is riskier for the bank.

Apart from the personal guarantees that the bank will insist on. 

Ltd may give you protection from (some) trade creditors but very rarely from a bank. Trust me, I have first hand experience.

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16 hours ago, Freki said:

Correct, the only real concern is how much can you sell below "current market value" to avoid the taxes and not being caught by HMRC. I am totally unaware of this.

@spyguy I think also like to remind that from the bank perspective you are expected to start paying higher interest. 

It makes sense since you go from being an unlimited company, basically there is no limit to how far the bank can skin you to recover their money, to a limited company. The bank can only repossess this collateral and any other assets that belongs to the limited company. So it is riskier for the bank.

It's unlikely you can get much of a loan for a limited company without a personal guarantee and as CunningPlan states above Banks know how to get a personal guarantee off you.

As for below market rate - that's rather difficult as the available datasets make generating an accurate estimate of the current market price of a property far easier than it used to be. 

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Sure but your garantee still only extends to how much it has been agreed. Whereas an unlimited system, they can go and sell your underwear to recover the money.

Land registry still registers some odd transactions where you can clearly see this is 50% below market rate. I don't know how quick HMRC is to investigate those cases. And if it will be updated at a later stage

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Are my calculations/assumptions correct? 

I am assuming he pays 40% tax. 

40% of 500K = 20K

This means he is paying 500K interest per year on his btl mortgage.

Assuming 5% interest rate on the loan. He has 1 million loan.

This is over 10%.

Oh those naughty banks.

It is also highly likely he does not have as much equity as he thinks.

As a self declared fair landlord he won't be charging more than 5% yield on his property which would give him 450K.

Oh dear! Oops.

 

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2 hours ago, lie to bet said:

Are my calculations/assumptions correct? 

I am assuming he pays 40% tax. 

40% of 50K = 20K

This means he is paying 50K interest per year on his btl mortgage.

Assuming 5% interest rate on the loan. He has 1 million loan.

This is over 10%.

Oh those naughty banks.

It is also highly likely he does not have as much equity as he thinks.

As a self declared fair landlord he won't be charging more than 5% yield on his property which would give him 450K.

Oh dear! Oops.

Corrections in bold. 

Is this true?

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7 hours ago, lie to bet said:

Damn.

I can't even do percentages now.

Please ignore above post.

Brilliant. I think we've all been there:)

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On 02/10/2017 at 5:15 PM, Freki said:

Correct, the only real concern is how much can you sell below "current market value" to avoid the taxes and not being caught by HMRC. I am totally unaware of this.

@spyguy I think also like to remind that from the bank perspective you are expected to start paying higher interest. 

It makes sense since you go from being an unlimited company, basically there is no limit to how far the bank can skin you to recover their money, to a limited company. The bank can only repossess this collateral and any other assets that belongs to the limited company. So it is riskier for the bank.

Some years ago, but I knew of a flat that was sold way below market value at the time - say £185k instead of about £220k.  I knew an offer at the higher figure had been turned down.  From the circs (it was owned by someone at the EA which was marketing it) should imagine it was def. sold cheaply to avoid CGT (it was a BTL) and very likely sold either to a mate or a son or daughter. 

You do wonder how often, or rather whether, these things are ever picked up.  

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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