Jump to content
House Price Crash Forum
Sign in to follow this  
Guest Popalot

Budget Statement Tomorrow

Recommended Posts

Guest Popalot

You see that would be SO clever, because the Tories have just shown that the public is very angry with fat cats (non doms etc) and being priced out.... and of course BTLs can fall into both categories......

If they cut BTL tax relief they may manage a huge swing back. But watch this space - look at that dreadful slapper Yv%%%tte they DO NOT HAVE THE FLAIR OR IMAGINATION........................................ ;)

Share this post


Link to post
Share on other sites
You see that would be SO clever, because the Tories have just shown that the public is very angry with fat cats (non doms etc) and being priced out.... and of course BTLs can fall into both categories......

If they cut BTL tax relief they may manage a huge swing back. But watch this space - look at that dreadful slapper Yv%%%tte they DO NOT HAVE THE FLAIR OR IMAGINATION........................................ ;)

no

Share this post


Link to post
Share on other sites

They could ensure all landlords are registered with the local authority to safeguard the health and safety of tenants.

Implementing a fair rent scheme would be fantastic news for renters.

Share this post


Link to post
Share on other sites
You see that would be SO clever, because the Tories have just shown that the public is very angry with fat cats (non doms etc) and being priced out.... and of course BTLs can fall into both categories......

If they cut BTL tax relief they may manage a huge swing back. But watch this space - look at that dreadful slapper Yv%%%tte they DO NOT HAVE THE FLAIR OR IMAGINATION........................................ ;)

Its very doubtful they will touch the BTL market

1. It would destabalise the housing market

2. It would reduce the availability of rented social housing and therefore government would have to build some of its own

3. It would cause a lot of bad publicity for GB and he is suffering as it is after bottling on the autumn election

This will be a bit of spin with a little give here and there but you wont see him do anything to upset the housing or stock markets

Tomorrow will be an exercise in GB kissing the countries ass

Share this post


Link to post
Share on other sites
Its very doubtful they will touch the BTL market

1. It would destabalise the housing market

2. It would reduce the availability of rented social housing and therefore government would have to build some of its own

3. It would cause a lot of bad publicity for GB and he is suffering as it is after bottling on the autumn election

This will be a bit of spin with a little give here and there but you wont see him do anything to upset the housing or stock markets

Tomorrow will be an exercise in GB kissing the countries ass

Absolutely agree with 1 and 2. Now is not the time, when the prices are already dropping to introduce this sort of thing. ONce the bubble looks like it's about to start again (in 10 years or so) that's when they should introduce this sort of thing. Then it would add some stability.

May not be necessary at all. Look at all the investment in Internet Start Ups nowadays...

Share this post


Link to post
Share on other sites
Its very doubtful they will touch the BTL market

1. It would destabalise the housing market

2. It would reduce the availability of rented social housing and therefore government would have to build some of its own

3. It would cause a lot of bad publicity for GB and he is suffering as it is after bottling on the autumn election

This will be a bit of spin with a little give here and there but you wont see him do anything to upset the housing or stock markets

Tomorrow will be an exercise in GB kissing the countries ass

I actually disagree. This is damage limitation time. I think they know something big and bad is coming our way from America. They will be keen to salvage some credibility from this mess and will want to look like the good guys, ending the tax breaks for BTL'ers to help all those poor priced out FTB's. Politicians always go with the side that is likely to win. They will soon turn tail on the housing market especially with priced-out FTB's being quite topical at the moment.

Share this post


Link to post
Share on other sites

I like the phrase stability in the housing market.

Would this stability mean

1) First time buyers at an all time low.

2) House prices at a record high.

3) The run on the bank at Northern Rock.

4) House prices dropping all over the place. Downturn.

5) Houses sitting on estate agents books for months.

6) Highest number of mortgage repossesions in the past 8 years.

7) A global credit crunch making mortage deals evaporate and be replaced with more expensive deals.

8) Over demand in the renting sector, due to uncontrolled immigration since 1997

9) Over 700,000 empty properties in the UK, bought for investment purposes.

10) A huge amount of people who cant and wont get on the property market.

Thats a powerful index of instability in the housing market. Maybe we should have some "instablity" which apparently isnt there at the moment and see how we can make the current situation worse.

Edited by debt-free

Share this post


Link to post
Share on other sites
I actually disagree. This is damage limitation time. I think they know something big and bad is coming our way from America. They will be keen to salvage some credibility from this mess and will want to look like the good guys, ending the tax breaks for BTL'ers to help all those poor priced out FTB's. Politicians always go with the side that is likely to win. They will soon turn tail on the housing market especially with priced-out FTB's being quite topical at the moment.

also, this is about taxation. There is a massive load of unviable BTL's out there which will soon be put up for sale. In the meantime, why not milk the BTL market for that bit more tax while it's still as big as it is? As others have said, most BTL'ers probably vote tory anyway!

Share this post


Link to post
Share on other sites
I actually disagree. This is damage limitation time. I think they know something big and bad is coming our way from America. They will be keen to salvage some credibility from this mess and will want to look like the good guys, ending the tax breaks for BTL'ers to help all those poor priced out FTB's. Politicians always go with the side that is likely to win. They will soon turn tail on the housing market especially with priced-out FTB's being quite topical at the moment.

He will not want to stir up any hornets nests. FTB's are small in number compared to HO and BTL LL's. Anything that would upset the housing market would be a big no no for GB at the moment. He is too battered and bruised after the polls and the media giving him a hard time over the bottling of the snap election.

This will be a general bit of spin. The biggest thing you can expect is a "we propose to adjust IHT to take into account rising fortunes experienced under a labout government" will be the words of darling.

Share this post


Link to post
Share on other sites

Some guy on BBC News at 10 said the Pre-Budget Report is going to contain a plan for private equity fat cats and inheritance tax. No hints being made about BTL

Share this post


Link to post
Share on other sites

They're a bit stuck on IHT, having spent the last week rubbishing the Tory proposals.

My guess is he'll announce a "review" of IHT.

Don't think he'll mess with BTL. I think he might do something about long-term empty rentals and second homes though. Although there is something at the back of my mind about them saying local authorities already have some powers to do with empty homes. Can't remember what though.

Plus, something for FTBs to counter the Tory stamp duty thing.

Share this post


Link to post
Share on other sites

Apart from the IoD there's been no real sign that BTLers are going to be hit by anything in the pre-budget report.

I am still wondering why the IoD did make this call, it's possible that they were put up to it.

Share this post


Link to post
Share on other sites

Looks like its private equity bosses, non domiciled taxpayers and family businesses :

http://politics.guardian.co.uk/economics/s...2186648,00.html

http://www.ft.com/cms/s/0/5e09a240-75da-11...00779fd2ac.html

Not all bad news for those with a long view. It's interesting how they are hitting out at debt as a way of decreasing profits liable to income tax and increasing lightly taxed CGT profits? Is there perhaps another investment class that has these characteristics.

Share this post


Link to post
Share on other sites
He will not want to stir up any hornets nests. FTB's are small in number compared to HO and BTL LL's. Anything that would upset the housing market would be a big no no for GB at the moment. He is too battered and bruised after the polls and the media giving him a hard time over the bottling of the snap election.

This will be a general bit of spin. The biggest thing you can expect is a "we propose to adjust IHT to take into account rising fortunes experienced under a labout government" will be the words of darling.

This statement is utter rubbish..

How many FTBs are there and how mant BTL'ers are there??

Depending on whats stats you look at FTBs are about 0-20% and BTLs are about 10% market....

FTBs are always going to hold a lot more punch than BTLs...just remember that FTBs are generation so their pain is felt up the ladder too ...so an FTBs pain is felt by their parents ect and all this is starting to filter through...

Why would GB care about BTL ?? In terms of revenue, he would get tax through stamp duty anyway..

Share this post


Link to post
Share on other sites

So just what exactly are these 'unfair' tax advantages for BTL? As far as I can see you are required to pay tax on profits, which is income - expenses.

No, I am not a troll and I do not have a BTL but I dose think there is a lot of hysteria and financial illiteracy surrounding this topic.

If you want to see an unfair tax advantage for BTL try Australia, which allows negative gearing. That means you can deduct any loss you make on an 'investment property' from your salary for the purposes of taxation. Which means that not only do they pay less tax, the rest of the non investment property owning public effectively pays more tax to subsidi the shortfall generated.

Share this post


Link to post
Share on other sites

So just what exactly are these 'unfair' tax advantages for BTL? As far as I can see you are required to pay tax on profits, which is income - expenses.

No, I am not a troll and I do not have a BTL but I dose think there is a lot of hysteria and financial illiteracy surrounding this topic. [mattyboy1973]

Absolutely. Mortgage interest is an allowable expense not a "tax break". It truly baffles me how anyone might think that the way to make housing more affordable is to increase the tax on rental property.

Share this post


Link to post
Share on other sites
So just what exactly are these 'unfair' tax advantages for BTL? As far as I can see you are required to pay tax on profits, which is income - expenses.

No, I am not a troll and I do not have a BTL but I dose think there is a lot of hysteria and financial illiteracy surrounding this topic.

If you want to see an unfair tax advantage for BTL try Australia, which allows negative gearing. That means you can deduct any loss you make on an 'investment property' from your salary for the purposes of taxation. Which means that not only do they pay less tax, the rest of the non investment property owning public effectively pays more tax to subsidi the shortfall generated.

Oh no. Here we go again. Try a search for posts on this before we go round again.

Here's how the tax break works. Buy a BTL with an IO mortgage (as you only get tax relief on the interest). Claim every allowance you can - wear and tear, depreciation, fees, maintenance, etc. Any "profit" you make (rental income over interest payments) thus gets written off. If you have a good accountant you might make a "loss" that you can offset against other income you pay tax on. If you do have to do any work, then it's tax-deductible.

So what's the point? Simple - buying IO represents taking out an option to buy at the same price at any time in the future (typically 25 years, but you could refinance at the end of that period). On the basis of past performance at the end of 25 years the lump sum owed on a three-bed semi will be about the cost of a medium family car. The point about IO is you fix the price at today's level.

The cost of this option is subsidised by the taxpayer, because you've claimed tax relief. For example, rental income £10k pa, interest/allowable expenses £10k pa, tax paid by you £0 pa. Your tenant has to earn about £13.5k pa to pay £10k pa in rent. Tax paid by tenant £3.5k pa.

If you buy on IO and live in it, then you have to earn £13.5k pa to pay £10k pa in mortgage interest payments and you pay £3.5k pa in tax.

Effectively as a btler your option to buy is subsidised by the taxpayer, and if house prices are rising that option can be very valuable indeed. This is why btling is government-sponsored speculation funded by the taxpayer.

And of course btlers are predicting that rents will increase in time, broadly in line with incomes. Since the mortgage payments are fixed at some previous point in time this makes the numbers look better as time passes. This is why btlers can outbid would-be OOs now, because in the case in point they only need to find £10k pa rather than £13.5k pa. Add in leveraging that £3.5k difference and extracting equity by refinancing existing btls and the btler has a massive advantage over would-be OOs; aided by a benevolent state.

Now you tell me, where's the financial illiteracy?

Share this post


Link to post
Share on other sites
Oh no. Here we go again. Try a search for posts on this before we go round again.

Here's how the tax break works. Buy a BTL with an IO mortgage (as you only get tax relief on the interest). Claim every allowance you can - wear and tear, depreciation, fees, maintenance, etc. Any "profit" you make (rental income over interest payments) thus gets written off. If you have a good accountant you might make a "loss" that you can offset against other income you pay tax on. If you do have to do any work, then it's tax-deductible.

Now you tell me, where's the financial illiteracy?

You cannot use negative gearing in the uk.

BTL may be a contributing factor in pricing out FTB'S but the tax advatanges in an of themselves are not 'unfair', they work just like any other business.

Share this post


Link to post
Share on other sites

Tax advantage is with the owner occupier.

The tax advantage in buying property is firmly with the owner occupier since they pay no tax on their imputed rent -- the rent they are effectively paying themselves for living in their own property. Where a property is let by its owner to another occupier then rental profits are subject to tax. If the owner and occupier happen to be the same person -- an owner occupier -- then no tax is payable. If the property is the owner's principal private residence then it's also exempt from any capital gains tax.

'Imputed rent':

http://en.wikipedia.org/wiki/Imputed_rent

In owner-occupancy, the landlord-tenant relationship is short-circuited. Consider two people, A and B, each of whom owns property. If A lives in B's property, and B lives in A's, two financial transactions take place -- each pays rent to the other. But if A and B are both owner occupiers, no money changes hands, even though the same economic relationships exists; there are still two owners and two occupiers, but the transactions between them no longer go through the market. The amount that would have changed hands had the owner and occupier been different persons is called the imputed rent.

The effect of owner occupancy is therefore that

  • the imputed rents disappear from measures of national income and output, unless figures are added to take them into account.
  • Government loses the opportunity to tax the transaction. Sometimes governments have attempted to tax the imputed rent (Schedule A of the U.K. income tax used to do this), but this tends to be unpopular.

UK Schedule A tax on Imputed Rent was abolished in 1963 (the associated mortgage interest relief for owner occupiers lived on as an anachronistic subsidy).

If you buy on IO and live in it, then you have to earn £13.5k pa to pay £10k pa in mortgage interest payments and you pay £3.5k pa in tax. [munro]

No you don't. You just need £10K of imputed rent which is tax free.

Now you tell me, where's the financial illiteracy? [munro]

The failure to take account of imputed rent (think of it as the money you save by not having to rent an equivalent property off a landlord).

If you still think that taxing landlords on a loss would be a viable taxation policy can you cite any country where this is currently done?

Edited by Jeff Ross

Share this post


Link to post
Share on other sites

"Imputed rent" - sure. This is, to give it a name, the "Northern Rock Fallacy" (NRF for short). The mistake is to look at asset values (and hence yields - rents) and not at cashflow.

Say I live in a £500k house with a £50k mortgage. My imputed rent is the difference between my mortgage payments and what I would pay in rent if I was a tenant. In this case, of course, the imputed rent is higher so I'm better off; in many cases the rent paid by tenants is less than the imputed rent (based on an IO mortgage on the same property with traditional 130% rental cover). It would be interesting to know whether imputed rents are higher or lower than actual rents across the rented sector, but that's another matter.

Say I earn £40k. I can comfortably afford my £50k mortgage, but no way could I afford rent on a £500k house. So if the imputed rent was monetised, I'd have to sell and move to something much smaller. At the moment we have about £3 trillion of housing supported on GDP of about £1.4 trillion. If imputed rents were monetised then the economy would collapse, followed by the housing market. Because we would be paying, every year, the full rental value at current market prices. Assuming we pay overall the same for housing as we do now, house prices would fall until imputed rents paid in total = actual rents paid by tenants + mortgage payments by owner-occupiers.

Northern Rock went bust because they have billions in assets (loan book) but grossly inadequate cash-flow. NRF is why so many businesses go bust. It's all about cash-flow; it doesn't matter how big your assets are if you can't support the cash-flow. And when the crunch comes other people don't have the cash-flow either, so asset prices fall. Which is where we are now. Imputed rents are a fallacy because they can't be monetised - just as you can't sell every house today at today's market price. It's an economist's fantasy.

Now let's turn the argument round. Imputed rent marks a difference between the benefit you derive from an asset and what you pay for it. In the case of a btler, you buy an option at today's price to buy a house at some point in the future (that's what an IO mortgage amounts to). Because you mortgage it, you pay for that option out of untaxed income. In the example I gave it costs you £10k. Over time the value of the house you buy goes up, as long as you hold it long enough. It is now worth more than you paid for it, so you have the imputed rent. And if rents have gone up you have the real McCoy as well.

Meanwhile your tenant is paying rent out of their taxed income, and they get no imputed rent as they are paying the rent. So on the basis of your own argument the btler wins out.

The point is that in the real world the btler gets a tax break and wins out, and that's to do with holding a put option in a market in which the nominal price rises.

As for negative gearing, that's got nothing to do with it. It's the put option that matters. As a btler you can pay more for the put option because you need only cover the cots of the option - the IO mortgage - out of untaxed rental income. Meanwhile someone buying to live in on IO needs to find the payments out of taxed income.

Of course the btler also needs somewhere to live. But the chances are they live in a house they bought years ago and have a very small mortgage. So on the imputed rent argument they win out yet again. In other words, however you cut it the btler buys their option out of income they don't have to pay tax on, whereas the OO does.

BTL is a business - yeah right. BTL is speculation. That's why people are buying put options on property with rental cover of 100% and less; it's why people are still btling even though the numbers don't add up. If btl was a genuine business it would have stopped dead in it's tracks several months ago. Since we don't give tax breaks to punters backing horses, I don't see why we should give tax breaks to btlers.

Edited by munro

Share this post


Link to post
Share on other sites
Guest Popalot

Edmund Conway in today's Telegraph lists at tax on BTLs as one possibility: (see last para) If you recall, the IOD were pushing for BTL taxation again last week.....

Budget Report is a chance to give... then take

Last Updated: 1:21am BST 09/10/2007

Alistair Darling's Report will probably be fiscally neutral, writes Edmund Conway

When it thuds down on desks around the City tomorrow afternoon, the Pre-Budget Report might seem at first glance to be a very similar animal to its predecessors.

It will share that familiar appearance – the sober, business-like cover, the trademark green text – and, clocking in at around 270 pages, will be almost exactly the length of Gordon Brown's last one.

But looks can be deceiving. For this single document will contain not just Alistair Darling's first PBR as Chancellor, but also the Comprehensive Spending Review – the Government's triennial review of how much each department will get in the coming years.

Whereas in previous years Mr Brown used both Budgets and PBRs to shape domestic policy, Mr Darling will start his Chancellorship as he means to go on – by concentrating on the UK tax system and economic policy.

And while he will present the CSR to Parliament, the reality is that its main targets were hammered out by Mr Brown's Treasury some time ago. The report does not go to press until late this evening – such is the level of secrecy surrounding government tax policy.

However, while some might speculate that the Prime Minister's confirmation there will be no snap poll this autumn will mean major changes to the PBR, widespread last-minute changes are both unlikely and unnecessary.

Tomorrow will almost certainly see some attention-grabbing tax changes. However, when all the cuts and rises are worked out, this will most probably be a fiscally-neutral PBR – meaning he will take back with one hand what he gives with the other.

In fact, don't rule out the possibility that it works out overall as a net tax rise. In the past, the PBR has often been used by Mr Brown to increase his revenues, while the Budget itself has been an opportunity for a giveaway.

The problem is that Mr Darling simply doesn't have enough money left. According to the Organisation for Economic Co-operation and Development, of all European nations Britain has the biggest structural fiscal deficit – in other words, borrowing is highest, given the speed of the economy.

Under Mr Brown, the Treasury persistently found itself having to borrow more than expected each year, and things have hardly improved since Mr Darling took over the reins. For instance, while this year's Budget predicted corporation taxes would have increased by 11.7pc between April and August, they have actually fallen by 3.1pc.

Bearing this in mind, there are a few things we already know for sure about the CSR.

The main one is that it will confirm that in this next phase of the Labour government we will experience a major slowdown in public spending. Mr Brown already announced that the overall spending target will be limited to a 2pc real increase (above inflation) over the next three years.

This is significantly lower than the average rate of 3.6pc since 1997. Mr Brown has also announced that education spending will increase by only 2.5pc in real terms – another significant drop, while defence gets 1.5pc and the Home Office sees its budget frozen in real terms.

As public sector workers flick through tomorrow's document, searching for the couple of pages which lay out how much their department will be receiving, they are more likely than not to find themselves sorely disappointed.

Neither will the economic prospects contained in the book be particularly encouraging. With all economic forecasters now anticipating a slowdown over the coming 18 months as a result not just of the credit crisis facing world markets but also Britain's persistent over-indebtedness, Mr Darling has already prepared the way for a downgrade of his forecasts.

Importantly, this will also leave him with less scope to hand out extra cash in the coming years, since lower growth means lower tax revenues, which in turn means less money in the public pot.

It looks increasingly as if the big giveaway will involve an increase in inheritance tax thresholds – though don't rule out cuts in either stamp duty or even some other big-name taxes.

Meanwhile, it seems likely the tax grabs will be on the wealthy – whether it's non-domiciled foreign workers, who avoid paying tax on their overseas earnings, private equity bosses or buy-to-let landlords.

Share this post


Link to post
Share on other sites

<wishfull thinking>They might compromise - make only 50% of rents received tax deductible, the extra tax raised will be used to increase IHT to 500k<\wishfull thinking>

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 354 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.