Capital Gains tax: buy-to-let investors must tear up retirement plans

Thrugelmir

I would hedge my bets that some taxation changes will be introduced that directly affect residential property investment. Eire's policy of reducing allowable interest offset to 75% against rental income for example. This would allow the Government to appease those against hefty increases in CGT rates and also appeal to the wider electorate who see property prices as a major issue.

Why give tax relief for borrowed money that is being gambled at no risk?

seraphina

If a BTL is a sound pension investment then surely the rent would be able to provide adequate returns, allowing the property to be sold upon death of the owner (at which point the income is no longer required) and deferring any tax liability to the estate?

There are winners and losers - for every BTL merchant who has to sell, there's a buyer who'll get a cheaper house. It's about time that buyers, especially FTBs could look forward to being at an advantage.

As someone else has already said, the tax system should encourage investment in productive areas of business.

monkeyspanner

There was one change in the budget which hasn't had much coverage. Holiday lets will be allowed once again to qualify for business CGT relief so the 10% rate will apply. This was stopped by labour as it was considered an avoidance issue.

JonnyBravo

carolt wrote: »

http://www.telegraph.co.uk/finance/personalfinance/capital-gains-tax/7773029/Capital-Gains-tax-buy-to-let-investors-must-tear-up-retirement-plans.html

Oh diddums, however will they cope.

Forced to own only 1 house each!

And they might have to pay for their pensions themselves, instead of getting me to pay for them.

My heart bleeds for them.

Don't fret carolt, I'm coping.
My champagne lifestyle can continue, safe in the knowledge that I'm not doing much for it. Perfect.

IveSeenTheLight

carolt wrote: »

http://www.telegraph.co.uk/finance/personalfinance/capital-gains-tax/7773029/Capital-Gains-tax-buy-to-let-investors-must-tear-up-retirement-plans.html

Oh diddums, however will they cope.

Forced to own only 1 house each!

And they might have to pay for their pensions themselves, instead of getting me to pay for them.

My heart bleeds for them.

Where does itsay they would be forced to one house each?

also from the link

Jonathan Cornell, of mortgage brokers First Action Finance, said: “Clearly anyone that is hoping to fund their retirement from their buy-to-let portfolio would have taken capital gains tax into account. But they had better rip up those calculations and start again as their fund value will be decimated.”

If and it is an if as it is saying captial gains may rise to 40% or 50% there always is the option with rental properties to use the monthly rent obtained as the pension without needing to sell off the properties.

I rent out two properties which take in over £2000 per calendar month.
Certainly if I was retired and the properties were paid off (as they will be long before I retire) then I think I could live on that as a pension.

No forced selling. LOL, BTL's valuable as a rental yield business as usual.

chucknorris

carolt wrote: »

http://www.telegraph.co.uk/finance/personalfinance/capital-gains-tax/7773029/Capital-Gains-tax-buy-to-let-investors-must-tear-up-retirement-plans.html

Oh diddums, however will they cope.

Forced to own only 1 house each!

And they might have to pay for their pensions themselves, instead of getting me to pay for them.

My heart bleeds for them.

Thanks for your concern Carol, but all is well.

I never actually thought it would go up to a flat (without any taper or indexation relief) 40% rate for more than a few years anyway. Sorry I should have warned you (although I think I did mention it on another thread) but I didn't realise that you were so worried for the LL's.

chucknorris

IveSeenTheLight wrote: »

BTL's valuable as a rental yield business as usual.

Yes my wife and I are having a bit of a rethink of our long term strategy, which was to sell up in about 10-12 years but it might be more prudent to hang onto 2/3 properties as an inflation hedge, additionally as you rightly say the yield is also good.

IveSeenTheLight

carolt wrote: »

'Investing' in BTL only worked as a strategy to make money if you could deprive a would-be homeowner of their dream of owning. If they could all afford to own, you'd be left with no-one to rent your property to.

Simply not true, there will always be people who 'choose' to rent.

It's been shown time and time again that the number of private rental properties are long term historically low and did not take up the same percentage of properties when social housing was sold off.

As there is a market for people to rent, there will be investors who will supply that market.

IveSeenTheLight

Thrugelmir wrote: »

The majority of BTL investors have no vehicle to repay the capital debt (and often have remortgaged just to fund the deposit). As the net after tax income is insufficent to repay the capital owed. A major failing in the business model.

The Majority. I very much doubt that.
Could you back that up?

Personally, I have bought in recent years and attain rent which more than covers the sapital and interest BTL mortgages I have.

Thrugelmir wrote: »

Too many got sucked in by the 100% rise in property value between 1999 -2004. Some 6 years later capital values in many areas are relatively unchanged. Hardly a route to luxury living.

Again a bit of an assumption.
Want to look at the latest indexes.
Certainly in my VI area, prices never dropped below the 2007 levels and have pretty much stagnated in the last three years.

Thrugelmir wrote: »

Exclude Greater London and the South East from property indices, and the market tells a totally different tale.

As above, my VI area is outside London and the South East and not as you have assumed.

RenovationMan

Pensions are a long-term investment and so it shouldn't be that surprising if the various rules and tax regimes change from the start of a pension to the end of one. Just in the last few years we have seen major changes to state pensions consisting of 30 years of NI contributions ratehr than 44, retirement for women changing from 60 years to 65, and both men and women's retirement ages being phased to 68 (and possibly upto 70). Private pensions have also changed beyond recognition with the old 15% contribution cap changed to 100% earnings, albiet with a lifetime 1.2M limit.

Anyone who thinks that various governments wont tinker with their retirement strategies over the course of 30/40 or even 50 years that they build up their pension pot is being unrealistic. You just have to roll with the punches. Surely though it's better to be doing something, rather than nothing?

To further the debate, could I ask what those posters on here who seem to be deriding BTL are doing themselves to pad out their retirement income?