"MP hints at buy-to-let tax breaks"

chucky

Spartacus_Mills wrote: »

Interesting article. For me the problem with renting, as seen in the BTL boom, is not so much the availability of rental properties but the type and the quality of them. Government regulation going back to Prescotts day forced more brownfield developments (no bad thing) but also higher density of homes for the land available. Hence the increase in flats in city centres with minimal demand for them. Manchester is like a ghost town in parts. But the build standard of these properties has been poor. For instance Cllr John Lines who chairs housing on Birmingham City Council looked to buy some flats in a private development in the Jewellry Quarter in Birmingham to use for social housing and the standard was so poor they failed to meet the councils criteria. Protecting tenants is one thing but the quality of the homes and diversity of property types available is also important. There are regulations in place but they would need to be reviewed and the issue of dealing with problem tenants also needs to be tackled. It always strikes me as hugely unfair the hoops a landlord has to jump through to evict a troublesome tenant.

the quality of private rental has increased apparently.

to add to your post, many say we should have a system like they have in Germany or Europe. unfortunately their system isn't as flexible and doesn't provide as much protection as the UK's tenancies do for both tenants and landlords.

we have AST, non-housing act and short term tenancy agreements. we also have tenancy deposit schemes that look to be working efficiently.

for me the statement is political noise that counteracts any intentions of clamping dwn on nBTL.

kennyboy66_2

IveSeenTheLight wrote: »

As a property investor, my point was that increasing CGT would reduce the likelyhood of me releasing properties, while a reduction may make it more tempting.

What would you be tempted to do if ?

1) Maximum interest allowable was capped at 1/2 the rental income, and the existing limit on original loan still in place.

2) Capital gains tax was ratcheted up in 5% increments over the next 4 years, and this was pre-announced.

3) A Tory government put in plans to reduce the total housing benefit bill by £4bn per
annum.

4) Stamp duty was extended to all properties.

5) Disadvanted area stamp duty exemption scrapped.

All sound ideas in my opinion, with each of them having at least some degree of likelihood.

Sir_Humphrey

chucky wrote: »

to add to your post, many say we should have a system like they have in Germany or Europe. unfortunately their system isn't as flexible and doesn't provide as much protection as the UK's tenancies do for both tenants and landlords.

It is plain wrong to argue that the European system has weaker protection for tenants.

Reforming along the lines of Europe will flush out the cowboys and numpties, and also reduce demand for privately owned housing by giving security of tenure to tenants. That should help bring house prices to a more reasonable level. European style reform would also include rent controls. Let's face it, the free market has delivered a completely dysfunctional housing system in the UK.

I doubt your average amateur landlord is going to mess about avoiding CGT, so would just sell up before the tax increased.

chucky

Sir_Humphrey wrote: »

It is plain wrong to argue that the European system has weaker protection for tenants.

Reforming along the lines of Europe will flush out the cowboys and numpties, and also reduce demand for privately owned housing by giving security of tenure to tenants. That should help bring house prices to a more reasonable level. European style reform would also include rent controls. Let's face it, the free market has delivered a completely dysfunctional housing system in the UK.

I doubt your average amateur landlord is going to mess about avoiding CGT, so would just sell up before the tax increased.

interesting points but it had little to do with my post - we have a good system in the UK. it can be improved of course it can but it's a good system.

is the European model as flexible as the UK?

does it provide as much protection as an AST would with a tenancy deposit scheme?

would you rather have to buy yourself out of a long term rental lease like you would do in Europe?

IveSeenTheLight

kennyboy66 wrote: »

What would you be tempted to do if ?

1) Maximum interest allowable was capped at 1/2 the rental income. This is already the case for a lot of rentals. It's capped to the interest on a loan at the maximum of the initial value of the property at the time of purchasing.

2) Capital gains tax was ratcheted up in 5% increments over the next 4 years, and this was pre-announced. At the moment I have no interest in selling, certainly I'm looking at keeping the properties for another 25 years. If I was getting close to retirement I would look closely, however, lets do the maths: -

An average property at £160k increases on the long term average of 3% so increases by £4.8K in the first year.

Capital gains is 18% of the increased price, so its a little hypothetical but lets assume the property was bought for £100k.
The increase in price is £60k but deductions are allowable of £10,100 individually or £20,200 for a joint owned property.

Keeping it simple, tax is then paid on the £40k (£60k - allowances of £20k)
The tax bill would be £7.2k, meaning that I would retain £152.8k

After a year, the property is worth £164.8k but the tax is up to 23% (5% increase), profit is £64.8k - allowances so £44.8k is taxable.
At 23% this is £10.3k, therefore I keep £164.8k - £10.3k = £154.5k

An increase in 5% CGT means it is still financially beneficial to hold on to the property for that year. Remember I have not included any income from renting throughout that year.

In short, if I was considering selling, a 5% increase per year would not make me decide earlier to sell up

3) A Tory government put in plans to reduce the total housing benefit bill by £4bn per annum.

Would mean nothing personally for myself.
The properties I have rented have gone to eitherprofessional people or students. I have not rented out to people on benefits

All sound ideas in my opinion, with each of them having at least some degree of likelihood.

Please see above for my replies

IveSeenTheLight

kennyboy66 wrote: »

4) Stamp duty was extended to all properties. This would not affect my options for selling

5) Disadvanted area stamp duty exemption scrapped. Again, doesn't directly impact me as a seller. stamp duty is a consideration for buyers

All sound ideas in my opinion, with each of them having at least some degree of likelihood.

I see you've added a couple.

Spartacus_Mills

chucky wrote: »

the quality of private rental has increased apparently.

to add to your post, many say we should have a system like they have in Germany or Europe. unfortunately their system isn't as flexible and doesn't provide as much protection as the UK's tenancies do for both tenants and landlords.

we have AST, non-housing act and short term tenancy agreements. we also have tenancy deposit schemes that look to be working efficiently.

for me the statement is political noise that counteracts any intentions of clamping dwn on nBTL.

I'm afraid there will be much more of it to come over the next few months. Even Denham, who always strikes me as a capable chap, has said it is a work in progress.

I do think the government has made some necessary reforms in the rental sector. Certainly annual gas and electric certificates, tenant deposit schemes and the like have been a big step forward.

There are still some sharp practises going on, especially with Letting agencies and fees charged which I do think should be clamped down on.

As for my example on housing wrt Birmingham council I did find it ironic that the council could give the green light to a private development where the homes were not up to the standard required for its own tenants. :rotfl:

zappahey

chucky wrote: »

the quality of private rental has increased apparently.

to add to your post, many say we should have a system like they have in Germany or Europe. unfortunately their system isn't as flexible and doesn't provide as much protection as the UK's tenancies do for both tenants and landlords.

I'm not quite sure how come to such a sweeping statement.

We rent in Belgium and there is both flexibility and protection.

Rental contracts can be for 1, 3 or 9 years and the notice periods and costs to end the contract are controlled by law.

There is protection for tenants in that the landlord can only terminate the contract under specific conditions and must give 6 months notice.

Furthermore, the incoming and outgoing inventories are performed by independent specialists (generally surveyors) and the cost is shared by both parties. The deposit is held in the tenant's bank account but it is blocked in that both parties must agree to the release of the money, meaning that the tenant still gets the benefit of the interest.

Clearly that is only one country but, having rented in the UK, Canada and Belgium, I would argue that the UK could learn a lot from other countries to improve the balance of flexibility and protection.

ETA: The only cost incurred for the tenant is the share of the inspection. No reservation fees, credit check fees, etc.

chucky

zappahey wrote: »

I'm not quite sure how come to such a sweeping statement.

We rent in Belgium and there is both flexibility and protection.

Rental contracts can be for 1, 3 or 9 years and the notice periods and costs to end the contract are controlled by law.

There is protection for tenants in that the landlord can only terminate the contract under specific conditions and must give 6 months notice.

Furthermore, the incoming and outgoing inventories are performed by independent specialists (generally surveyors) and the cost is shared by both parties. The deposit is held in the tenant's bank account but it is blocked in that both parties must agree to the release of the money, meaning that the tenant still gets the benefit of the interest.

Clearly that is only one country but, having rented in the UK, Canada and Belgium, I would argue that the UK could learn a lot from other countries to improve the balance of flexibility and protection.

i'm 100% sure they're not generalisations - you can do all of that in your post in the UK plus you're protected by a tenancy deposit scheme not some block on a bank account

did you conveniently forgot to mention what notice period you have to give to move out f a property... :rolleyes:

Thrugelmir

IveSeenTheLight wrote: »

Your right, my comments are from a personal perspective, as I would think most comments on this foum are.

As a property investor, my point was that increasing CGT would reduce the likelyhood of me releasing properties, while a reduction may make it more tempting.

Your interpretation of what the tax breaks might be may be a little optimistic. The government is already reliant upon private rentals and has been giving up any control they might previously have had by paying any rent benefits direct to the person in order for them to have a personal choice of where to live.

A tax advantage will merely have the effect of pushing up property prices further as investors compete for prime letting property. As opposed to investing elsewhere.

It does nothing for providing long term stability to the lettings market in a cohesive manner.

Hopefully the next incoming Government will adjust the tax system to benefit those that create wealth or jobs.