Tax man is comming after landlords.

Conrad

joepubli wrote: »

Actually, for most people once they have taken off the mortgage interest, agent's fees +VAT and repair/refurbishment costs there isn't a whole lot left that's taxable.

Any money made is the increase in the value of the property rather than rental income.

My model is all about generating income. On a typical flat I'll make about £5000 or so profit on the income with a 75% mortgage on a place costing say £120k 2 months ago, but that figure is now seemingly £140k+ so in future I'd get a profit of less than £5k. I self manage.


I have this endless internal debate about whether I ought to target capital growth but every time I do the numbers I come to the following conclusions:


+ Targeting cap growth means I end up with a paultry rental profit
+ What's the end game? If I make £250k growth over five years, then what? To realise it I have to sell which means a hefty tax bill circa £100,000. Now what do I do with the profit?

Buy another place, but what's the point as they do have now increased in value in what have I achieved?
Or I have to release equity but again I've then got to pay a lot more for future places as its taken a fair old while to get this cap growth.


+ Targeting cap growth means relying on fewer tenants as you buy fewer places, and it also tends to mean larger initial debt.
This is for me more risk. The payments on each mortgage are large so if one tenant defaults it hurts whereas on cheaper places the mortgage payments are only £250-£300 or so pm.


+ As I am not making rental profit, how do I re-invest? In my model all rental profit is re-invested.




NOT SAYING I'M RIGHT HERE AND I'M BLOODY INDECISIVE SO I MIGHT BE MISSING SOMETHING.

TheFactory

CLAPTON wrote: »

something of the order of 400,000 immigrants arrive in the UK each year

what is your proposal for places to live:-
-they should all immediately buy a property
-the state should provide them with subsidised property to Parker Morris standards in desirable areas
-camp in Hyde Park.
-compulsory billeting with people who hate small landlords.

His argument is flawed, people need rental homes and there is an incentive for those that can to provide this.

Now I do not agree that landlords should be pricing out FTB, but unfortunatly this is a supply side issue and I think the majority of this (and indeed the wider housing problems) are confined to the SE and other hotspots like brighton, Aberdeen etc. Certainly where I invest you can buy a solid 2/3 bed victorian terrace for £50,000 and you will have a queue of people willing to give you £450 pcm to rent it from you. Now if you can afford to rent a house at that figure then you can afford to buy it - the reason they don't is because they do not want to buy it or cannot obtain a mortgage. For these people I provide safe, mordern and well maintained home for as long as they want it, I do not increase the rent for the duration the tenant decides to stay, I inspect twice a year and fix and issues as soon as possible.

The tenant is happy, the landlord is happy but a few fools on MSE are not happy.

ladeeda

Old article from 2012 which estimates that the outstanding (evaded) tax from LL's is 550 million. Reckon that's worth collecting.
http://www.independent.co.uk/news/uk/home-news/exclusive-private-landlords-evading-at-least-550-million-tax-on-rental-incomes-8315885.html

In 2009/10 £1.8 billion of tax was collected on rental income – 550M equates to more than 23% not being paid.

http://www.landlordsadviceline.com/news/private-landlords-evading-at-least-550-million-tax-on-rental-incomes.html

I only know 2 LL's who say they pay tax - I know several who have boasted that they don't.

IveSeenTheLight

ladeeda wrote: »

Old article from 2012 which estimates that the outstanding (evaded) tax from LL's is 550 million. Reckon that's worth collecting..

Interestingly they also said

However, that initiative was expected to recover only £17 million in unpaid tax

It would be interesting to read the data behind this as to how they estimate the value

michaels

I declare all rental income to the revenue.

ladeeda

[QUOTE=IveSeenTheLight;65573861

It would be interesting to read the data behind this as to how they estimate the value[/QUOTE]

Good point, I have had a look to find further info on exactly this but can't. If I do at a later date I will post it. 17M is a very poor return on 550M. Almost make you think they don't want it.

CLAPTON

ladeeda wrote: »

Good point, I have had a look to find further info on exactly this but can't. If I do at a later date I will post it. 17M is a very poor return on 550M. Almost make you think they don't want it.

for a BLT owner with a single property, tax owed is likely to be in the order of a few hundred pounds once all the costs come off

a tax man probably costs about £200 a day

it may not really be cost effective to chase up the small people except of course to 'encourage the others'.

JamesSmith2000

Conrad wrote: »

Just wanted to relay what's happening on the front line in case of interest.


The letting agent within my office has been told by HMRC to provide in depth detail on all landlords on her books to include their home address and total gross rents received. This instruction came through a while back and now they are enforcing all agents provide the info which she is now doing.


I would imagine once they get their teeth into cases they will be looking at not just income but things like from where the 25% deposits came.


It's not uncommon to hear LL's implying nothing has ever been declared so some bills are going to be eye watering.

Lots of repossessions looming.

gallygirl

Conrad wrote: »

I have this endless internal debate about whether I ought to target capital growth


NOT SAYING I'M RIGHT HERE AND I'M BLOODY INDECISIVE SO I MIGHT BE MISSING SOMETHING.

:rotfl:Are you me? :rotfl:I have the same internal debate - use the same arguments and reach the same conclusion so maybe we're both right :cool:. What is your end game though? We're now using profit to save up and pay off the mortgages when I take early retirement so I have a good income - will start making capital repayments soon and reduce term to preserve the tax relief for now.

Oh dear..... I mentioned tax relief.........

Graham_Devon

There are many many what are classed as "accidental landlords".

This definition seems to cover those who didn't wish to sell for a "lower price" over the last few years and those who don't see themselves running a business, but simply using the tools available to them to get a bigger house.

The housing and renting board has been littered with both these landlords and the tenants of said landlords. Some of them go down the route of renting out their properties and only coming to this forum in particular to answer questions when they get stuck.

If they don't know about gas safety certificates, and many, it appears, don't, then it's likely they won't know the full tax issues. They may even be paying more than they are required.

But certainly, even on the sub forum on here, many have had it pointed out to them that they are not even legal landlords, running a business on a residential mortgage. It goes without saying that if this is the case, it's highly likely huge swathes of this group are not paying the correct taxes. Some don't even see themselves as running a business, let alone paying taxes on it.

Heres just one thread highlighting the issue:
https://forums.moneysavingexpert.com/discussion/4917130