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enworb

Buy-to-let?

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Unless a LL buys below market value at auction, chances are they won't make much, if anything from the rent.Occasionally yes but the competition from builders and professional LL's will increase the price of delapidated proprty.TV programs have also contributed.

I accept this as a bull and so should you. Yes, new builds are being bought off plan in bulk at bmv but they are over priced in the first place so no need to worry there either.

It's the families that have out grown their homes but want to hang onto them because they are so sure prices will still keep going up. Or simply because they are down sizing and can easily afford to. So they rent out their homes (often with no mortgage) and buy something more suitable.

This is possibly where your concern should be, not just btl'ers

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Unless a LL buys below market value at auction, chances are they won't make much, if anything from the rent.Occasionally yes but the competition from builders and professional LL's will increase the price of delapidated proprty.TV programs have also contributed.

I accept this as a bull and so should you. Yes, new builds are being bought off plan in bulk at bmv but they are over priced in the first place so no need to worry there either.

It's the families that have out grown their homes but want to hang onto them because they are so sure prices will still keep going up. Or simply because they are down sizing and can easily afford to. So they rent out their homes (often with no mortgage) and buy something more suitable.

This is possibly where your concern should be, not just btl'ers

Or rent them out to move overseas. B)

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Unless a LL buys below market value at auction, chances are they won't make much, if anything from the rent.Occasionally yes but the competition from builders and professional LL's will increase the price of delapidated proprty.TV programs have also contributed.

I accept this as a bull and so should you. Yes, new builds are being bought off plan in bulk at bmv but they are over priced in the first place so no need to worry there either.

It's the families that have out grown their homes but want to hang onto them because they are so sure prices will still keep going up. Or simply because they are down sizing and can easily afford to. So they rent out their homes (often with no mortgage) and buy something more suitable.

This is possibly where your concern should be, not just btl'ers

A valid point - the price of new build flats has fallen dramatically in the last year whereas 3, 4 and 5 bedroom houses have increased in price.

Having said that, how many family type renters are there? I don't know but does demand meet supply or vice versa?

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Unless a LL buys below market value at auction, chances are they won't make much, if anything from the rent.Occasionally yes but the competition from builders and professional LL's will increase the price of delapidated proprty.TV programs have also contributed.

I accept this as a bull and so should you. Yes, new builds are being bought off plan in bulk at bmv but they are over priced in the first place so no need to worry there either.

It's the families that have out grown their homes but want to hang onto them because they are so sure prices will still keep going up. Or simply because they are down sizing and can easily afford to. So they rent out their homes (often with no mortgage) and buy something more suitable.

This is possibly where your concern should be, not just btl'ers

The trouble is that if you rent out your house, you may undermine your position in terms of freedom from capital gains tax when you eventually come to sell. The tax liability could swamp any returns from renting.

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The trouble is that if you rent out your house, you may undermine your position in terms of freedom from capital gains tax when you eventually come to sell. The tax liability could swamp any returns from renting.

If it's the same as btl, taper relief reduces the amount of tax payable. Up to full taper relief after 10 yeras, where no cgt is payable.

I think there is also an advantage of ltb over btl where the first 3 years are exempt from cgt.And also they won't need the 85% ltv which is the most banks will lend for a btl.Often banks want 25% deposit.

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The last time Let-To-Buy became really popular was around 1990, as people found they couldn't sell their property, yet they wanted a bigger house.

So the foolish ones rented out their existing property and bought another.

It's happening all over again.

The sensible option would have been to drop their price, get out of the market, find a really nice place and rent for a few years.

Yet many people will make the same mistake again.

Edited by BandWagon

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If it's the same as btl, taper relief reduces the amount of tax payable. Up to full taper relief after 10 yeras, where no cgt is payable.

I think there is also an advantage of ltb over btl where the first 3 years are exempt from cgt.And also they won't need the 85% ltv which is the most banks will lend for a btl.Often banks want 25% deposit.

Just to confirm, after 10 years you will indeed be entitled to maximum Taper Relief but unfortunately this is limited to 60%.

I'm not saying don't do it, but you need to have your eyes wide open as far as taxation is concerned (or hope that the tax man never catches up with you).

The trouble with property is that, unlike shares, you cannot sell a fraction of a house so you can soon be dealing with big sums.

I nearly ran into trouble myself a few years ago when I came to sell my house (at quite a profit), I had queried my tax position by letting rooms out to lodgers even though I lived there myself.

Regards

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Just to confirm, after 10 years you will indeed be entitled to maximum Taper Relief but unfortunately this is limited to 60%.

Regards

With buy-to-let full taper relief after 10 years means full relief of the initial 40% that is applicable for the first 3 years.

After 3 years taper relief is 5% per yera until 10 complete years (40%) which means zero tax is payable.

Not sure of the implications of a let-to-buy considering the first 3 years are exempt from tax. Maybe the 40% starts after this time and full taper relief is after 13 years??

And don't forget cgt is only on profits over the allowance ,which is roughly £8800 per year. In other words, with annual allowance inflation increases, you could make £50k over 5 years and not pay a penny cgt :)

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Guest muttley

With buy-to-let full taper relief after 10 years means full relief of the initial 40% that is applicable for the first 3 years.

After 3 years taper relief is 5% per yera until 10 complete years (40%) which means zero tax is payable.

Not sure of the implications of a let-to-buy considering the first 3 years are exempt from tax. Maybe the 40% starts after this time and full taper relief is after 13 years??

And don't forget cgt is only on profits over the allowance ,which is roughly £8800 per year. In other words, with annual allowance inflation increases, you could make £50k over 5 years and not pay a penny cgt :)

One of us doesn't understand Capital Gains Tax.

Firstly, I believe the £8800 "allowance" is not cumulative, but only applies to profit from that tax year. So in your example,if you made 50k profit after 5 years you would pay CGT on £41,200 ( same as year 1,2,3,4)

This is why there was a loophole known as "Bed and Breakfast" that allowed shares to be sold on March 31st and bought back the next day in order to make full use of the allowance. Gordon Brown closed the loophole.

Secondly, I recently asked my accountant to give me some idea of how much CGT I would pay if I sold my business, and believe me, there was lots. I have owned the business for 17 years. So unless there is some exemption for Buy to Let that I don't know about, the there will be CGT to pay on profits made whether you hold them for 10, 20 or 30 years. Even if there is an exemption you can't be sure it will be around when you come to sell.

I am not a tax expert, so please accept my apologies if I'm completely wrong on this matter.

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One of us doesn't understand Capital Gains Tax.

Firstly, I believe the £8800 "allowance" is not cumulative, but only applies to profit from that tax year. So in your example,if you made 50k profit after 5 years you would pay CGT on £41,200 ( same as year 1,2,3,4)

This is why there was a loophole known as "Bed and Breakfast" that allowed shares to be sold on March 31st and bought back the next day in order to make full use of the allowance. Gordon Brown closed the loophole.

Secondly, I recently asked my accountant to give me some idea of how much CGT I would pay if I sold my business, and believe me, there was lots. I have owned the business for 17 years. So unless there is some exemption for Buy to Let that I don't know about, the there will be CGT to pay on profits made whether you hold them for 10, 20 or 30 years. Even if there is an exemption you can't be sure it will be around when you come to sell.

I am not a tax expert, so please accept my apologies if I'm completely wrong on this matter.

For what it's worth, I'm pretty sure your understanding of CGT is correct.

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Guest muttley

For what it's worth, I'm pretty sure your understanding of CGT is correct.

Thanks. I'll stick with my accountant then.

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Taper Relief has two asset classes:

• Gains on business assets

• Gains on non-business assets

Taper Relief applied to gains on business assets is very generous and equates to 50% chargeable gain after 1 year and 25% after 2 years.

As one might expect, the Chancellor is very sniffy about what he allows to be classed as business assets and my understanding is that for the typical punter residential property definitely ain’t one of them.

So we are left with the far less generous Taper Relief applied to non-business assets.

This runs as follows: 3 years 95%, then by 5% decrements until a maximum of 60% is reached after 10 years.

The annual exempt allowance is £8,800 and under no circumstances can this be treated as cumulative (although it does tend to rise with inflation).

All pretty straight forward, no need to speak to an accountant.

The following link will take you to an IR help sheet 279 which will give you chapter and verse and expain what to do for assets held for longer periods.

http://www.hmrc.gov.uk/helpsheets/ir279.pdf

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According to letting agents, in my area, East Sussex, more than 50% of rental properies are unsold homes, ie Let-to-Buy

IMO these people will be taking out new 80+% mortages to purchase their new place - and are probably added in the FTB figures :blink:

A huge risk IMO, and the withdrawl of the unsold places is probably distorting the sold prices and helping to create the mirage of a "bouyant" market

Didn't realise this was also popular just before the last crash

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A valid point - the price of new build flats has fallen dramatically in the last year whereas 3, 4 and 5 bedroom houses have increased in price.

Having said that, how many family type renters are there? I don't know but does demand meet supply or vice versa?

egh? I am seeing the exact opposite, new build flats are up massivly. In worcester new flats are 160-> 240k when they were 120k a few years ago. Big 4/5 houses have dropped from 300k to 230k....

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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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