Wednesday 20th Budget Discussion

IronWolf

Capital expenditure can't be used to offset against tax. It is capitalised and depreciated over its useful life.

Interest being deducted before tax is standard for any business in the country, its not tax relief.

chucknorris

EvilJaz wrote: »

Say a brand new kitchen and bathroom.

Maybe not live in it straight away but maybe sometime in the future?.

Sorry if i say something silly, i am no expert. Just find it interesting.

'Improvements' cannot be set off against income tax but they can be offset against capital gains tax when you sell. However replacing an existing fitted kitchen and similar bathroom would not be classed as an improvement though and it would be allowed yes.

You couldn't expect tenants to stay there without a kitchen and bathroom so you would probably lose about 7-10 days rent. Also if you are talking about moving in at some point in the future, don't expect a nice new kitchen and bathroom, most tenants will not look after it like you would. If I was doing this (in fact I have done this) I would put another new kitchen in for myself after the tenants have had their use out of it.

I would not rent out a complete dump like you are suggesting that you would though, I don't deal at the bottom of the market.

EDIT: I refurbished a flat in 2005 and spent just over 20k, if my memory is up to scratch I think I claimed about 12k against income tax, so out of the 20k spent I only clawed back under £5k from the inland revenue. I can of course claim the other 8k against tax when I sell probably in about 8-10 years but that will be about 17 years after the work was done. But at current CGT %'s that would only be just over 2k that I would benefit.

EvilJaz

Home buying/ownership shouldn't be a business.

dryhat

EvilJaz wrote: »

Home buying/ownership shouldn't be a business.

BTL in its current form (i.e. borrowing a deposit from one property to "buy" another with an IO mortgage) is not a business.

It is sub-letting a property and hoping for capital gains somewhere down the line.

In other words, a speculative punt.

ILW

dryhat wrote: »

BTL in its current form (i.e. borrowing a deposit from one property to "buy" another with an IO mortgage) is not a business.

It is sub-letting a property and hoping for capital gains somewhere down the line.

And why is that not a business?

dryhat

ILW wrote: »

And why is that not a business?

Because without the hoped for HPI, it doesn't make any money.

ILW

dryhat wrote: »

Because without the hoped for HPI, it doesn't make any money.

All businesses carry an element of risk. Some never make a profit until they are sold. Why should BTL be any different?

EvilJaz

But its treated like a business?

chucknorris

ILW wrote: »

All businesses carry an element of risk. Some never make a profit until they are sold. Why should BTL be any different?

You mean like that idiot that sold facebook for a pittance and is now destitute (not).

IveSeenTheLight

IronWolf wrote: »

Capital expenditure can't be used to offset against tax. It is capitalised and depreciated over its useful life.

Interest being deducted before tax is standard for any business in the country, its not tax relief.

Agreed, however the refurbishment of a property is not like buying a company car or printer/scanner/fax machine.

The costs were borne to bring the property up to scratch and hence the property started off with a "loss" which menas that future profits can be retained without taxation until the value is recouped.