how does the budegt affect BTL?

Thrugelmir

tomcat_ wrote: »

Does it make a difference that the mortgage is not a buy to let but a first time buyer's mortgage?

You are letting property and will be subject to the tax rules governing same.

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%

Even without the tax changes this sounds a marginally profitable business.

Innys1

tomcat_ wrote: »

Does it make a difference that the mortgage is not a buy to let but a first time buyer's mortgage?

Yes it does, you are defrauding your lender and should be paying more in interest. Other than that, no.

tomcat_

Thrugelmir wrote: »

You are letting property and will be subject to the tax rules governing same.



Even without the tax changes this sounds a marginally profitable business.

thanks for the reply.

It's not meant to be a business. Just bought the house for myself and then i had to move abroad. Hence i have rented it out. Are my calculations correct that i will be paying more in tax that i will be making in profit?

Innys1 wrote: »

Yes it does, you are defrauding your lender and should be paying more in interest. Other than that, no.

perhaps you want to take another look in my original post mentioning "lender's consent"

leveller2911

tomcat_ wrote: »

Hi all,

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.

Good to know you can get "lenders conscent" to rent the property out for a good few years. I was under the impression "conscent to let" was suppose to be a short term measure, typically 3yrs...You would think that the lender would have put you on a BTL mortgage given the less profit they would be making on the mortgage.


You never stop learning on here..

Innys1

leveller2911 wrote: »

tomcat_ wrote: »

Hi all,



Good to know you can get "lenders conscent" to rent the property out for a good few years. I was under the impression "conscent to let" was suppose to be a short term measure, typically 3yrs...You would think that the lender would have put you on a BTL mortgage given the less profit they would be making on the mortgage.


You never stop learning on here..

My point exactly. I doubt the lender granted their consent to let for the best part of ten years.

More likely, the lender never bothered to chase up the OP after the period of consent expired.

tomcat_

great stuff...i'm writing here to exchange views on the new budget and i'm been accused of defrauding my lender or being deliberately forgetful to obtain their consent.
If this is important let's get that out of the way then, shall we?

The mortgage is with Nationwide and obtained in 2004 on interest only basis.
The property has been let out in 2006 with the consent of Nationwide.
Since then i had another consent in 2010 and another one in 2013. This is why Nationwide is charging 1.5% extra interest for renting my property out.

If there are no more questions at the above at someone is it possible thcan confirm that my calculations are right and I will be paying £930 tax on a real profit of £576?

thanks

Kynthia

Taxable profit has often differed from cash profit so there is no expectation for them to be the same. The 10% wear and tear allowance isn't a real cash expense yet it was an amount you could use to reduce your taxable profit and therefore the tax you pay.

It's worth you doing some sums to see what cash profit you make after tax and see whether it's worth keeping the property. At the moment it seems like you don't make much some any voids or expensive repairs would mean you would make a loss. Perhaps other investments would make you more money if you sold and invested the proceeds. Have you looked into whether your now qualifying for CGT?

Old_Git

I have calculated my tax return (due January).I was not expecting to pay tax on this years income at the same time .I know for fact my income for this year will be lower than last year .They dont seen to have allowed for that

Innys1

Old_Git wrote: »

I have calculated my tax return (due January).I was not expecting to pay tax on this years income at the same time .I know for fact my income for this year will be lower than last year .They dont seen to have allowed for that

Bear in mind the tax return you have completed online was for the 12 months to 5 April 2015.

The amount you have to pay by the end of January includes a payment on account for the 12 months to 5 April 2016.

If you KNOW your income will be less than the previous tax year, you can apply to have your payment on account reduced.

Be careful, though, because if you get your figures wrong and the payment on account shouldn't have been reduced, HMRC will nail you.

tomcat_

Kynthia wrote: »

Taxable profit has often differed from cash profit so there is no expectation for them to be the same. The 10% wear and tear allowance isn't a real cash expense yet it was an amount you could use to reduce your taxable profit and therefore the tax you pay.

It's worth you doing some sums to see what cash profit you make after tax and see whether it's worth keeping the property. At the moment it seems like you don't make much some any voids or expensive repairs would mean you would make a loss. Perhaps other investments would make you more money if you sold and invested the proceeds. Have you looked into whether your now qualifying for CGT?

indeed i kept the property not for profit but possible capital appreciation as long as the rent is covering the mortgage interest.

however from 2020 i will be paying more tax than profit. Is my interpretation of the new budget right?