how does the budegt affect BTL?

Oldbiggles

Using abbreviations can be quite confusing. When I saw the title of this post BTL, I thought he might be going to tax Bacon Tomato and lettuce rolls???

:rotfl:

MJ12

Yea! I bet if we get rid of all the landlords, we will have enough space in the capital to build something like this:


An apartment for everyone, no rent, no mortgage. It will be awesome!

tefb

Does anyone know of a calculator available online to work out the impact of the budget on landlords? I have found bankrate and yahoo finance versions but they are American.... And this useless.

jamei305

It's very simple and there's no need for a calculator. Just apply 20% relief to your mortgage interest.

Alias_Omega

Profit is king, tenants will suffer through increases in rent, or lack of un-necessary maintenance.

Letting agents will be chopping (12.5% of rental income charges) instead to manage properties themselves, or with a "finders" fee.

Landlords with BTL which will be costly, will look to "dump" houses on the market before 2017.. this may see more houses on the market within areas, and lower house prices as the number of buyers compared to sellers reduce...

sgjeffery

Could someone please help clear up some confusion over tax thresholds. Some articles regarding these budget changes have suggested that lower rate tax payers might be pushed into a higher tax rate bracket by the changes but I don't understand how.

I am a lower rate tax payer - I know the threshold is something like 45,000 but is that gross or net income? In order to calculate my annual income do I need to include the full rental amounts received or do I deduct expenses first (including interest paid) to determine my income? If I was pushed into the higher bracket, would I only be taxed 40% on any income over the 45,000 (not the total income)?

Mallotum_X

booksurr wrote: »

presumably you are used to doing a tax return already so I'm surprised you need to ask such a basic question or have you only just started letting?

your tax return is a summary of your total taxable income, that is made up of :
a) gross income received through employment
b) the net profit of your rental business
c) gross savings interest
d) gross dividends received
e) any other (gross) income not mentioned above

the total of a) - e) is your total taxable income and you apply the tax threshold s to find out how much you should pay that year. From that "should pay" total you then deduct any tax already paid (eg that deducted under PAYE per your P60, interest tax deducted at source etc ) leaving you with the net tax payable

the higher rate tax bracket for 15/16 is £42,385 comprising 10,600 tax free plus 31,785 taxed at 20%. You pay tax at 40% on anything over that figure (up to the next threshold where 45% tax starts but you are no where near that)


PS as your question has nothing to do with the original thread it would have been better to start your own thread rather than hijacking this one as people may now start re-answering the OP rather than your post if they start reading from the beginning rather than the end!

Ps the question is very relevant.

The interest element is now a relief rather than a cost. The profit and therefore the impact on threshold is calculated before the application of the relief. Hence the shifting of people into the 40% band and then the relief is applied.

sgjeffery

Mallotum_X wrote: »

Ps the question is very relevant.

The interest element is now a relief rather than a cost. The profit and therefore the impact on threshold is calculated before the application of the relief. Hence the shifting of people into the 40% band and then the relief is applied.

Thank you Mallotum - that was exactly what I was getting at and this is indeed very relevant, particularly as several posts have declared that lower tax payers have nothing to worry about. If the interest element is now no longer considered a cost then it could push some of those who are just below the threshold to above and is something that should be borne in mind.

Thrugelmir

Alias_Omega wrote: »

Profit is king, tenants will suffer through increases in rent, or lack of un-necessary maintenance.

.

What's changed? Appears to be the case. No need for an excuse to do so.

tomcat_

Hi all,

I'm not so sure i got the changes right even after reading the 6 pages long thread.

I have bought a property in Manchester in 2004 which i lived in it for a couple of years. After that i had to move abroad with work and last year i came back to work in London. I have been renting the Manchester property out since i left abroad (with the lender's consent).
Upon my return I have bought another property in London and this is where i live now.

The property in Manchester has the following:
I get £4800 in gross rent and i pay £3600 in interest for my mortgage. I also have £100 landlord insurance and £576 for agency fees. I also deduct £350 for 10% wear and tear as it is fully furnished.
Therefore in 15/16 i will declare a profit of £174 which will be taxed with 40%

I understand that from 2020 the interest that i will be able to deduct as an expense will be half of that nowand there will be no wear and tear allowance.

Therefore the expenses would be 3600/2= 1800 for interest

Rent: 4800
interest 1800
insurance 100
Agency fees 576

total profit: 4800-1800-100-576=2324
40% tax: 930

Assuming i have no expenses on the property, then the real cash that i get is 524 but i will be paying tax of 930?
Is that correct?
Does it make a difference that the mortgage is not a buy to let but a first time buyer's mortgage?

thanks for your help