Vote on 3x salary mortgage cap

Ian_Griffiths_Halifax

chewmylegoff wrote: »

actually i think that the wilsons are unincorporated business, as they said one of the reasons they were starting to sell is the reduction in capital gains tax rates. companies don't pay CGT so it suggests unincorporated.

Companies do pay CGT but at a lower rate.

Ian_Griffiths_Halifax

baileysbattlebus wrote: »

My daughter and her partner have a mortgage with the Nationwide - it was done in a similar manner to your description.

She had credit card debt of £3k and he had a car loan- the Nationwide offered them 2 amounts - one with their debt and one without. Upshot was the amount offered with their existing debt wasn't enough to allow them to buy the house they wanted.

The sold the car, paid of the loan with the proceeds and paid off the credit card then got the higher of the 2 amounts.

They borrowed over 3 times income - around about 4 I think it was.

That's a good example, but now, for continuity of affordability, any future lender (they've sold a car and may need another in the future) should now do a "Cross Lender Affordability Assessment".

PS. If the FSA are reading, I don't mind them taking the title and I won't charge a fee.

chewmylegoff

Ian_Griffiths_Halifax wrote: »

Companies do pay CGT but at a lower rate.

afraid not.

they pay corporation tax on profits and chargeable gains, and the rate is up to 30% depending on the total profit.

Ian_Griffiths_Halifax

chewmylegoff wrote: »

afraid not.

they pay corporation tax on profits and chargeable gains, and the rate is up to 30% depending on the total profit.

I was under the impression that they pay Capital Gains Tax at the Corporation Tax Rate.

This, from an Accountants site, sort of goes with what I was thinking:

Accumulated funds could be withdrawn on a sale of shares with the benefit of capital gains tax (CGT) entrepreneurs' relief which reduces the capital gains tax to an effective rate of 10% on the first £1,000,000 of capital gain. Thereafter any gain is chargeable at a flat rate of 18%.

stevetodd

Graham_Devon wrote: »

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=182875&nl=MM_BN&dep=webops&dte=180309

The Turner Review says the FSA is considering regulating the buy-to-let market as well as second charge mortgages.

The review says the FSA's paper later this year reviewing mortgage conduct of business rules will look at whether or not extension of its regulatory scope to these sectors is necessary.The Turner Review says: "The paper will consider whether more effective regulation of the mortgage market, through tighter conduct rules or direct product regulation, would require the extension of the FSA's remit to cover second charge mortgages and buy-to-let mortgages."

"There is a difference between someone who buys a buy-to-let property as an extension to their pension fund, who might need more protection against bad advice, and someone who owns 350 buy-to-let properties, who has a limited company in his own name, who might arguably know more about the sector than the FSA itself, and would not need the same degree of protection.

Your link doesn't mention anywhere about BTL mortages no longer existing, which as you know was the point I was answering.

I have now read the relevant section of the Turner Report (rather than articles about it). Interestingly they are talking about IF (it's by no means certain) they did introduce income multiplier regulations they may be varied throughout the economic cycle! i.e. presumably tighten up near the top of the market but be looser at the bottom, which means whilst in 'bust mode' (ie now) they would probably not be applied but they would be introduced (or tightened) to stop houses getting out of control in the next boom.

chewmylegoff

Ian_Griffiths_Halifax wrote: »

I was under the impression that they pay Capital Gains Tax at the Corporation Tax Rate.

This, from an Accountants site, sort of goes with what I was thinking:

it doesn't go to what you are saying at all, that paragraph refers to the CGT charge on an individual relating to the sale of shares owned by that individual. the thing you posted refers to the tax charge on an individual which crystallises when they sell shares i.e. you set up a limited company, you then sell the share capital of that company to someone else, you personally pay CGT on the transaction. not the company.

what it is saying is that if you build up retained profits in a business - say it has £1m of cash and £1 million retained profits - rather than draw the money out and get charged 40% tax as salary or 37.5% as dividend, you can sell the company to someone else and only pay CGT on the increase in value of the shares at 18% - assuming you could get someone to pay £1 million for the company, that would obviously be the best way to go.

when a company sells an asset, the gain on that asset is added to their tax adjusted operating profits. they get charged corporation tax on the lot, and the rate depends on how much the total is.

Ian_Griffiths_Halifax

chewmylegoff wrote: »

it doesn't go to what you are saying at all, that paragraph refers to the CGT charge on an individual relating to the sale of shares owned by that individual. the thing you posted refers to the tax charge on an individual which crystallises when they sell shares i.e. you set up a limited company, you then sell the share capital of that company to someone else, you personally pay CGT on the transaction. not the company.

what it is saying is that if you build up retained profits in a business - say it has £1m of cash and £1 million retained profits - rather than draw the money out and get charged 40% tax as salary or 37.5% as dividend, you can sell the company to someone else and only pay CGT on the increase in value of the shares at 18% - assuming you could get someone to pay £1 million for the company, that would obviously be the best way to go.

when a company sells an asset, the gain on that asset is added to their tax adjusted operating profits. they get charged corporation tax on the lot, and the rate depends on how much the total is.

I didn't say I was right in what I was thinking! I said it sort of goes with what I was thinking. I'm always happy to be corrected if I'm wrong.

chucky

chewmylegoff wrote: »

actually i think that the wilsons are unincorporated business, as they said one of the reasons they were starting to sell is the reduction in capital gains tax rates. companies don't pay CGT so it suggests unincorporated.

ok - i had assumed from reading on here they were Ltd Company based.
Ltd Co's do pay Capital Gains Tax it's not the rate an individual pays though, it's lower.

chewmylegoff wrote: »

re your point, the answer is that they can, but only if the business is raising money from UK investors for certain purposes. the wilsons, obviously, would not fall into this net.

this was my point i was trying to get across to Graham

chewmylegoff wrote: »

however, what can be regulated is the amount of risk that a bank is allowed to take, so the bank could be prevented from lending in certain ways, rather than BTLers being prevented from borrowing in certain ways, if that makes sense.

this again was my re the BTL through a Ltd Co, they are two different circumstances - thanks for the clarification

whathavewedone

If they are looking at temporarily tightening the lending criteria during the next boom to prevent it getting out of control then I don't particularly have a problem with that. Similarly a temporary tightening during a period of high interest rates would also be justifiable. It's doing it now that would be madness.

I have to say that I have my doubts as to whether the FSA will actually be around by the time of the next boom. I have a hunch that labour might not be in power by then...

custardy

can you get houses for 3x your salary? not in Edinburgh on my wages thats for sure