The Budget

cells

yep it looks like they basically just got rid of wear and tear allowance

It was perhaps too generous for London rentals getting £2k a month but for most the country with rents closer to £600-800 per month it was probably reasonable

A reduction to 5% would have been better

chucknorris

vivatifosi wrote: »

The devil is in the detail....

I've just spotted something in the Red Book that I don't think was announced and relates to Buy to Let, so copying below as it may affect some on here:

1.192 The government will also reform how landlords of residential property can account for the costs they incur in improving and maintaining rental property. Currently, landlords of furnished properties can deduct 10% of their rent from their profit to account for wear and tear, irrespective of their expenditure. This means landlords can reduce their tax liability even when they have not improved the property. From April 2016, the government will replace this allowance with a new system that enables all landlords of residential property to only deduct costs they actually incur.

This looks like it might be cost neutral, if improvement works are to become (income rather than capital gains) tax deductible, but I wish they had left it alone as it will create much more paperwork.

chucknorris

cells wrote: »

yep it looks like they basically just got rid of wear and tear allowance

It was perhaps too generous for London rentals getting £2k a month but for most the country with rents closer to £600-800 per month it was probably reasonable

A reduction to 5% would have been better

Exactly what I was thinking, more bloody paperwork. Although it looks like improvement works might be offset against income tax. Hard to say though, the wording isn't very explicit.

Graham_Devon

michaels wrote: »

However I thought the 10% depreciation allowance for furnishing wear and tear was designed to make things simpler for both landlords and the tax workers

It may have been. But clearly it's excessive for many properties.

Secondly, it just brings it into line with what every other company or self employed person has to do. Keep the receipts and simply claim what they have spent.

I'm not sure why BTL landlord should be exempt from doing what hundreds of thousands of others have to do to claim allowable expenses.

cells

chucknorris wrote: »

This looks like it might be cost neutral, if improvement works are to become (income rather than capital gains) tax deductible, but I wish they had left it alone as it will create much more paperwork.

that statement you quoted reads as some internet view rather than a direct quote from hmrc

for a start it says the old system was 10% reduction in tax which is wrong, it was 10% of rent used as a cost which reduced profit and hence tax due on profit

so I don't think the new system allows for improvements to be offset as a cost, that is probably someones view of replacing an old washing machine with a new one as an improvement. probably improvements will continue as they are, eg off capital gains when you sell

cells

Graham_Devon wrote: »

It may have been. But clearly it's excessive for many properties.

Secondly, it just brings it into line with what every other company or self employed person has to do. Keep the receipts and simply claim what they have spent.

I'm not sure why BTL landlord should be exempt from doing what hundreds of thousands of others have to do to claim allowable expenses.

given a large number of properties its probably easy to calculate what the cost of replacing/maintaining furnishings is so using a wear and tear allowance seems common sense and good for both sides. The old figure of 10% might have been too generous but the idea is sound imo as a way to reduce needless admin. it might result in some people paying a little less tax but also in some people paying a little more

whereas obviously for "other businesses" it would in most cases be impossible to set some kind of revenue dependant cost they can deduct as there would not be any kind of usable standard or norm

chucknorris

Graham_Devon wrote: »

It may have been. But clearly it's excessive for many properties.

Secondly, it just brings it into line with what every other company or self employed person has to do. Keep the receipts and simply claim what they have spent.

I'm not sure why BTL landlord should be exempt from doing what hundreds of thousands of others have to do to claim allowable expenses.

There are other tax simplifications, 2 are I know of, are bed and breakfast expenses and also simpler accounts for businesses with smaller turnovers. I reckon that there will be plenty of other examples.

daveyjp

MFW_ASAP wrote: »

(look at how much council tax is used to fund council pensions.

About 4-7%. Or do you honestly believe its 25% because you read it somewhere.

chucknorris

cells wrote: »

given a large number of properties its probably easy to calculate what the cost of replacing/maintaining furnishings is so using a wear and tear allowance seems common sense and good for both sides. The old figure of 10% might have been too generous but the idea is sound imo as a way to reduce needless admin. it might result in some people paying a little less tax but also in some people paying a little more

whereas obviously for "other businesses" it would in most cases be impossible to set some kind of revenue dependant cost they can deduct as there would not be any kind of usable standard or norm

The inland revenue is going to be very busy making sure all that expensive new furniture actually ends up in the rented property, instead of the landlord's own home.

Thrugelmir

chucknorris wrote: »

The inland revenue is going to be very busy making sure all that expensive new furniture actually ends up in the rented property, instead of the landlord's own home.

That's a giveway for a start.

I expect the announcement is merely the tip of the iceberg. The actual change in tax legislation is going to be far more reaching and detailed.