The Budget

cells

theEnd wrote: »

I thought this was difficult to continually do? I'm in the process of doing it for the first time, but that's a 15 year old company and for a legitimate reason.

HMRC website says

There’s no limit to how many times you can claim Entrepreneurs’ Relief, and you can claim up to £10 million of relief during your lifetime.

In your case its probably worth thinking about. Probably dont do it each and every year but let it build up and do it say in five years time could save you in the order of £80k in tax. Obviously think this though yourself or get legal/tax advise and dont listen to some nutter on the net

but anyway, these changes i think make it more likely people will go down that line and it just screws those who are making more modest profits of £6-£40k where its certainly not worthwhile or possible to take out the profits via entrepreneurs relief

theEnd wrote: »

All dividends come with a 10% tax credit, which is currently included as your earnings for thresholds etc.

Take a £10k dividend, and it counts as £11.111k income with 10% tax already paid. You make up the difference of the 32.5% tax on the £11.111k = another £2.5k.

oh yes i thought you were on about child or family tax credits or some such thing

[Deleted User]

lisyloo wrote: »

No I think your wrong on that.
The intention is NOT that people deliberately change their circumstances to get the benefits.
A classic example is benefits for single mothers.
The benefits were put in place to benefit abandoned women who found themselves in unfortunately circumstances.
It was NOT the intention that women deliberately got themselves pregnant to claim the benefit.

So agree that changes in rules change behaviour, but it's absolutely NOT the intention (in this case).
In some cases, it IS the intention that behaviour is changed e.g. taxes on smoking.

I'm reasonably sure that someone else would be involved......:)

Not much change in our household that I've spotted so far, (Scotland; 2x Superannuation pensions, 1 student, 1 on DLA,) but I'll need to see when details are avaiable. The happier IDS looks the more concerned I am!

WR

theEnd

cells wrote: »

HMRC website says

There’s no limit to how many times you can claim Entrepreneurs’ Relief, and you can claim up to £10 million of relief during your lifetime.

In your case its probably worth thinking about. Probably dont do it each and every year but let it build up and do it say in five years time. Obviously think this though yourself or get legal/tax advise and dont listen to some nutter on the net

I won't have the opportunity again. Now part of a bigger company with a few other directors and employees.

My old company still being shut down. Accountant reckons I pass the checks for the entrepreneur rate, but said there were many checks and if the amount exceeds certain other ratios of divds over a number of years etc, hmrc wouldn't accept it.

lisyloo

I've worked through my own example, which is 8k wages, plus £83k divd

Don't know your age or circs, but wouldn't the company putting £40K into a pension be a good idea?

marathonic

movilogo wrote: »

The way I see changes for BTL,

Now BTL landlord gets £1000 in rent, pays £400 mortgage interest so pays tax on £600 profit (assume no other deductions). Tax would be 40% of 600 or £240. So, net in hand = 1000 - 400 - 240 = £360

In new rule, if the landlord is not a basic rate tax payer, will pay tax on whole of £1000 rent (like for like).

As he is higher rate tax payer, so he would end up paying £400 as tax. So end of day, he would only keep 1000 - 400 - 400 = £200 in hand.

All new landlords (who bought their BTL properties recently) will be pretty much screwed then (of course only if they are not basic rate tax payers - where the old rule still prevails).

In Ireland, tax relief is allowed at your marginal rate - but only on 75% of mortgage interest paid.

Based on my experience of filling in tax returns whilst I was resident there, the above calculations are not correct.

The more likely calculation using your figures would be:

Old System:
£1000 in rent, pays £400 mortgage interest. Pays 40% tax on remainder - £240 tax.

Profit: £1000 - £400 - £240 = £360

New System:

£1000 in rent, pays £400 mortgage interest - gets 20% relief on mortgage interest and pays 40% tax on remainder.

Profit:

£1000 rent
-£400 mortgage interest
-£80 tax relief on mortgage interest
= £520 gross profit
-£208 tax at 40%
= £312 net profit

TheBlueHorse

so, is someone on 30k better or worse off? what about 50k or 100k?

gagahouse

movilogo wrote: »

The way I see changes for BTL,

Now BTL landlord gets £1000 in rent, pays £400 mortgage interest so pays tax on £600 profit (assume no other deductions). Tax would be 40% of 600 or £240. So, net in hand = 1000 - 400 - 240 = £360

In new rule, if the landlord is not a basic rate tax payer, will pay tax on whole of £1000 rent (like for like).

As he is higher rate tax payer, so he would end up paying £400 as tax. So end of day, he would only keep 1000 - 400 - 400 = £200 in hand.

All new landlords (who bought their BTL properties recently) will be pretty much screwed then (of course only if they are not basic rate tax payers - where the old rule still prevails).

I think in your example they would be able to claim 20% of the £400 as tax relief so £80 would be deducted from 1000 .

1000-80=920@40% tax = 368

1000-400-368= 232 in hand

400-232=168 per month less profit assuming no other expenses

that's a 42% loss, quite a hit for a higher rate taxpayer

this will have several effects

1) disincentivise owning >2 or 3 BTL
2) will drive the marginal profitability landlords out of the market, good for some FTB's
3) reduce supply and increase some rents in some areas

it goes some way to levelling the playing field with FTB's and will put a brake on the BTL share of overall mortgage market currently around 15% but growing fast

Graham_Devon

Sums are starting to come in now.

A single parent working school hours on minimum wage will gain £400 in extra income, but will lose £860 in tax credits.

The OBR state that the inheritance tax changes will lead to older people having less of a reason to downsize meaning overoccupation for the younger generations.

Converting the grant for uni to a loan is likely to see 30-60% less students from the poorer end able to attend university.

Graham_Devon

Oh and one thing I'm really glad to see that has only just come to my attention.

Support for Mortgage Interest (SMI) will now be a loan, not a benefit.

Could have done with doing this years ago!

http://www.mortgagestrategy.co.uk/news-and-features/sectors/products/products-news/budget-support-for-mortgage-interest-to-become-a-loan/2022413.article

Graham_Devon

And this just goes to show what's actually going on....

Currently...
Taylor Wimpey down 5.19%
Barratt Down 5.9%
Foxtons down 4.6%
Countrywide down 2.4%

Reaction from the non dom rules!!!