how does the budegt affect BTL?

murphster

Slight shift in focus, but I'm am trying to get some more info about the new stamp duty rules. It seems BTL and second homes are going to incur a 3% stamp duty bill. I can't seem to find any accurate or certain info about how this will affect people converting current homes to buy to let and purchasing a new residential property.

Any ideas, will the stamp duty definitely have to be paid on the 'second residential home', or could it be paid on the BTL.

I will have a BTL valued at 72,000 (let to buy mortgage already in place) and residential purchase price ~ 160,000 but still looking and unlikely to complete before 01/04/2016. I have asked this on other threads but having scoured the internet I am getting confused messages. I rang HMRC a few days ago and even they seem unsure.

Thank-you.

_CC_

mlz1413 wrote: »

What if you don't intend to sell.
Your current rent is paying a bit more than the mortgage / bills, the surplus is re-invested so the property is kept in good order, so no tax payable (pre autumn budget)
Intention is to keep the property and use it as a income on retirement.

Many seem to forget that the government wanted BTL investment and 10 years ago it was a much better bet than pouring money into a pension when annuities were plummeting.

I'm with rtidrtid pay down what you can off the mortgage before 2017.

If it makes sense for you then good luck with it.

My point is BTL is mainly attractive as an investment/business because of the leverage it entails. If you're purchasing a house with cash or paying off the mortgage quicker you're effectively banking on the net rental income and any capital appreciation to outperform other investments.

Keep in mind rental income and realised capital gains usually incur tax.

When compared to other investment classes which can be much more tax friendly, not to mention easier to maintain, I don't believe many BTLs would be the best choice, and that's at a time when interest rates are on the floor.

murphster

booksurr wrote: »

why start another post when the answer has already been given and won't change just by posting in another place

the details of how it will work in many possible scenarios are not yet published....read:

http://forums.moneysavingexpert.com/showpost.php?p=69688944&postcount=15

taken from here: https://forums.moneysavingexpert.com/discussion/comment/69688944#Comment_69688944

Thanks, I hadn't seen that thread before. It seems there a lot of questions that are unanswered. It looks like I won't really know the answer to this until the end of Feb. I can't believe final decisions will be made that close to the 'start'date' when the process of house buying takes a lot longer than one month.

kingstreet

murphster wrote: »

Any ideas, will the stamp duty definitely have to be paid on the 'second residential home', or could it be paid on the BTL.

I will have a BTL valued at 72,000 (let to buy mortgage already in place) and residential purchase price ~ 160,000 but still looking and unlikely to complete before 01/04/2016. I have asked this on other threads but having scoured the internet I am getting confused messages. I rang HMRC a few days ago and even they seem unsure.

Thank-you.

As SDLT is levied on the purchase of property, it's difficult to see how it can be levied on a LTB remortgage or CTL scenario where the property is already owned.

We are advising our LTB purchasers to assume the new regime will apply on their purchase, until we know any different, for definite. Unless of course they exchanged contracts before 25/11/15.

Edwardbear

FIRSTLY EVERYONE NEEDS TO SIGN UP ONLINE TO THE "BTL PETITION", TODAY so this proposal can be reviewed in the House but another 50,000 signatures required and only a few days left to do this.Also hope everyone has written a stinking letter to their Tory MP saying this is a legit business expenditure and if they do not reverse the tax you will withdraw your vote next time..I calculate if you have a few properties and therefore in the 40% tax bracket, with 75% LTV mortgages you will not only have NO profit you will owe HMRC a lot of money so you will have to start selling property just to pay them and of course then they also take their CGT cut.Don't waste more money figuring out loopholes and setting up companies as the government , lawyers, accountants will just take your money then that loophole will be closed.As far as i am concerned i would love to see every BTL property dumped on the markets, see property value falls , slum landlords move in and then lets see who wants to vote Tory again, certainly not owner occupiers or their children who have even less property to rent.This tax is not about making it fairer for first time buyers its about taking more tax revenue from an easy target.BTL landlords should be getting a government grant aid for providing a valuable service which they the government are unable to do.

booksurr

Edwardbear wrote: »

FIRSTLY EVERYONE NEEDS TO SIGN UP ONLINE TO THE "BTL PETITION", TODAY so this proposal can be reviewed in the House but another 50,000 signatures required and only a few days left to do this.Also hope everyone has written a stinking letter to their Tory MP saying this is a legit business expenditure and if they do not reverse the tax you will withdraw your vote next time..I calculate if you have a few properties and therefore in the 40% tax bracket, with 75% LTV mortgages you will not only have NO profit you will owe HMRC a lot of money so you will have to start selling property just to pay them and of course then they also take their CGT cut.Don't waste more money figuring out loopholes and setting up companies as the government , lawyers, accountants will just take your money then that loophole will be closed.As far as i am concerned i would love to see every BTL property dumped on the markets, see property value falls , slum landlords move in and then lets see who wants to vote Tory again, certainly not owner occupiers or their children who have even less property to rent.This tax is not about making it fairer for first time buyers its about taking more tax revenue from an easy target.BTL landlords should be getting a government grant aid for providing a valuable service which they the government are unable to do.

your stance is an emotional rant without any rational substance other than the fact it will cost you money

every governmental policy ever drafted and legislated either increases or reduces someone's cost base and they are either happy or unhappy depending on their personal circumstance. You clearly fall into the latter but offer no reason why others should sympathise with your reduced income

that the petition has failed to reach the threshold speaks volumes

Laura13214

:question::eek: I hope people are still reading this thread!

Can anyone help with an example of how it would (or wouldn't affect someone who is in the 20% tax bracket. All the examples I've seen are for those in the 40% tax bracket (which I'm not!). All I want to know is will it affect me, and if someone can give a basic example of how it's worked out (very basic please) so I can try and assess how it would affect me.

Any help available would be appreciated!

Mallotum_X

Laura13214 wrote: »

:question::eek: I hope people are still reading this thread!

Can anyone help with an example of how it would (or wouldn't affect someone who is in the 20% tax bracket. All the examples I've seen are for those in the 40% tax bracket (which I'm not!). All I want to know is will it affect me, and if someone can give a basic example of how it's worked out (very basic please) so I can try and assess how it would affect me.

Any help available would be appreciated!

No current impact on income tax for those in the 20% bracket

booksurr

Laura13214 wrote: »

:question::eek: I hope people are still reading this thread!

Can anyone help with an example of how it would (or wouldn't affect someone who is in the 20% tax bracket. All the examples I've seen are for those in the 40% tax bracket (which I'm not!). All I want to know is will it affect me, and if someone can give a basic example of how it's worked out (very basic please) so I can try and assess how it would affect me.

Any help available would be appreciated!

if this is not simple enough then employ an accountant
example using 16/17 rates, so Higher rate tax threshold = 11,000 personal allowance (PA) + 32,000 @20% = 43,000

basic rate taxpayer
job income/salary : 25,000
gross rental income 10,000
BTL mortgage interest £6,000
BTL other (non mortgage costs) costs £500

total taxable income: 25,000 + 10,000 - 500 = 34,500 - 11,000 PA = 23,500 taxable after PA
23,500 is less than 43,000 so basic rate taxpayer

initial tax due: 23,500 @ 20% = 4,700
less tax relief on mortgage: 6,000 x 20% = 1,200

actual tax payable: 4,700 - 1,200 = 3,500

as a basic rate taxpayer the rule change as NO IMPACT AT ALL ON YOU

higher rate tax payer
job income 38,000
gross rental income 10,000
BTL mortgage interest £6,000
BTL other (non mortgage costs) costs £500

total taxable income: 50,000 + 10,000 - 500 = 59,500 - 11,000 PA = 48,500 taxable after PA
48,500 is more than 43,000 so HR taxpayer

initial tax due: (33,000@20%)= 6,600 + (48,500-33,000@40%) = 6,200
less tax relief on mortgage: 6,000 x 20% = 1,200

actual tax payable: 6,600+6,200-1,200 = 11,600

as a higher rate taxpayer the tax payable is reduced by only 20% of the mortgage interest not by 40% of that figure. Hence HR relief has been removed without any impact on basic rate taxpayers as they still get 20% anyway