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hedi

Here Is One For The Btlers

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speaking to a chap the other day.

he bought about 5 years ago in norfolk, a small 2 up 2 down £100,000. now worth nearly double that.

he done well i thought. it was a btl. good for you. then i started on the sums.

20,000 capital and 80,000 mortgage.

but he has been mewing rather a lot. in fact they wont give him any more.

his loan, an interest only loan is now 150,000 on a value of approx 180,000 to 190,000. oh and he is now subbing the tenents as they no longer cover the mortgage.

lets look at the profit.

he sells, lets be generous 190,000 less fees and vat and solicaotrs costs . netts 180,000.

less the mortgage 150,000 ( probabily a redemption fee but we will ignore that.)

30,000 back. but then he has spend the rest of the profit so good for him.

but hang on what about mr browns share. he gets 40 pct of the profit of 80,000 less costs that can be put down, say 10,000 so that 40 pct of 70,000 which is 28,000 to hm treasurary

so back comes a cheque for 2,000 pounds.

bearing in mind the initital depost of 20,000 its not such a good return. oh yes he did enjoy the mew money.

never mind it is a pension you know.

so sell and pay mr brown all the profit and original capital or keep subbing the tenents. :unsure:

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but hang on what about mr browns share. he gets 40 pct of the profit of 80,000 less costs that can be put down, say 10,000 so that 40 pct of 70,000 which is 28,000 to hm treasurary

so sell and pay mr brown all the profit and original capital or keep subbing the tenents. :unsure:

I do wonder how many people actually declare this as earnings though? It is pretty easy to fix it. Just put it in your wifes name and say you split for a few months, therefore making it her primary residence.

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bearing in mind the initital depost of 20,000 its not such a good return. oh yes he did enjoy the mew money.

He's confused his house with an ATM machine.

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hm govenment not so daft. he has been subbing the tenets and off setting the rents againt the mortgage. they will want their money. and they will know when he sells. and what profit he has made.

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but hang on what about mr browns share. he gets 40 pct of the profit of 80,000 less costs that can be put down, say 10,000 so that 40 pct of 70,000 which is 28,000 to hm treasurary

so sell and pay mr brown all the profit and original capital or keep subbing the tenents. :unsure:

I do wonder how many people actually declare this as earnings though? It is pretty easy to fix it. Just put it in your wifes name and say you split for a few months, therefore making it her primary residence.

The the wife will pay the tax, it's not income tax but captical gains.

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"but hang on what about mr browns share. he gets 40 pct of the profit of 80,000 less costs that can be put down, say 10,000 so that 40 pct of 70,000 which is 28,000 to hm treasurary"

I am not an accountant, but I have been talking to one. 40% sounds a lot, but he will have allowances for each year the property has been his. Also if his wife half owns she will also have allowances. After everything is done and dusted he will probably be faced with a bill more in the region of 10 grand.

Yes I know these figures are very rounded up/down, but as we all know taxes are a bit complicated these days and I have only heard this from someone else.

So he will take a hit but it is likely to be a fair bit smaller than that suggested.

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but hang on what about mr browns share. he gets 40 pct of the profit of 80,000 less costs that can be put down, say 10,000 so that 40 pct of 70,000 which is 28,000 to hm treasurary

so sell and pay mr brown all the profit and original capital or keep subbing the tenents. :unsure:

I do wonder how many people actually declare this as earnings though? It is pretty easy to fix it. Just put it in your wifes name and say you split for a few months, therefore making it her primary residence.

I believe HM Revenue & Customs are much more efficient at spotting such evasive tactics and if they do pick it up would not accept such a proposition.

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But he's had another £80K out of it for nothing - he's made a lot more profit than the one you suggest - just because he spent it does not mean it's a bad investment - he may have reinvested the profits unwisely, but he's done pretty well from what I can see. He put in £20K and got £100Kish out of it. Damned good in my book.

It's an asset you can leverage - he did and he enjoyed it - what's the problem - it's not his own house, it was always an investment property and he's made a fortune on it ? Yet you seem to see it as a bad thing...... ?

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He is entitled to an annual profit for every year he has owned it. Over five years he would be entitled to around £40k before paying any tax.

Don't forget CGT is only for profits. Any improvements to the property and any legal fees are deducted so i'm afraid you didn't get your facts right.

Sounds like he's done ok to me.

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The initial post was a little simplified and uninformed do you not think.

If he has mewed and enjoyed the money then good luck to him. Just because he only gets £2,000 (according to your way out figures) now doesnt detract from the fact he has already had £50,000+

If the gentleman takes all of the allowances available to him (annual allowance, taper relief, capital expenses) you could find that the the payable CGT comes to a lot less than the £28,000 quoted.

Sounds like sour grapes supported by a poor argument to me?

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hm govenment not so daft. he has been subbing the tenets and off setting the rents againt the mortgage. they will want their money. and they will know when he sells. and what profit he has made.

You really don't know enough about this topic. You should try asking for others advice before making assumptions.

I'm not being rude. If I am not sure about something I ask someone that does know.

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i may well be wrong, but i think that some of you are.

you seem to assume that one can add up ones cgt allowance each year and use that against any profit. i dont think that that is right.

secondly, as i said he has done well. but its not much of a " its my pension" argument, if people have already spent the cash.

i appreciate its a simplistic argument, but the point is , that btlers are in a strange position, that actually stops them from selling. as if they are to calculate their selling costs and cgt bills, its not worth them selling.

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i may well be wrong, but i think that some of you are.

you seem to assume that one can add up ones cgt allowance each year and use that against any profit. i dont think that that is right.

secondly, as i said he has done well. but its not much of a " its my pension" argument, if people have already spent the cash.

i appreciate its a simplistic argument, but the point is , that btlers are in a strange position, that actually stops them from selling. as if they are to calculate their selling costs and cgt bills, its not worth them selling.

If he has been renting out at a 'loss' he can offset this against any CGT as long as he declares the losses. Also he can claim for wear and tear and maintenance and offset this against CGT. He can claim for all costs assoc with the BTL (I think) and these can be offset, even for trivial things like the cost in travelling to visit the BTL when required to do so. The losses can be backdated by more than a year as long as they get declared to the IR.

However you are probably right in that many will choose to hang on to their BTLs rather than sell. One final dodge for CGT is if you can declare the BTL as a main residence, i.e. you live there for a short period before selling (2 years?)

then you pay no CGT. This may prove more cost effective.

NB you don't have to live in the 'main residence' full time to qualify so you could (maybe?) sublet two rooms and 'live there' as a part time live in landlord before selling.

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Bears have scored a home goal with this little tale, for every mug who spends it all there are many others investing wisely. Not bad work for signing some mortgage documents....

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  • 301 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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