how does the budegt affect BTL?

Thrugelmir

Madglover wrote: »

Why doesn't the government do the simple thing of flooding the market with a huge amount of houses.

The Chancellor has a wider remit to address. Weaning people off the dependency for "income credits". This change should not be looked at isolation.

poppy10_2

Old_Git wrote: »

Am I correct in thinking the 10% allowance for wear & tear is ending .
This was a nice bonus for me .

There will be no more automatic entitlement to a 10% allowance. You will still be able to claim for legitimate expenses you have undertaken to maintain the property to address wear and tear, but will csn only claim for money you have actually spent on upkeep. In the past people would just pocket the 10% and not actually do any maintenance

Fella

This is a change that will impact landlords far more if & when interest rates rise.

Innys1

poppy10 wrote: »

There will be no more automatic entitlement to a 10% allowance. You will still be able to claim for legitimate expenses you have undertaken to maintain the property to address wear and tear, but will csn only claim for money you have actually spent on upkeep. In the past people would just pocket the 10% and not actually do any maintenance

Not strictly true. The 10% was designed to be pocketed and used when an appliance or fixture needed replacing, e.g. the washing machine or the carpet. The landlord wouldn't also be able to claim the replacement cost of said item.

The alternative was to not claim the 10% and claim for the exact cost of every replacement appliance.

The change is to abolish this choice and landlords can, from April next year, only claim for replacements they have actually made.

Peronihull

Am I the only one confused??

I work my tax liability out quite simply and in line with the what I thought were the rules. Anyone care to walk me through the new process (or was I doing it wrong to start with??!?) -

So I have a rental property of which the rental income is £950 per month. I am a higher rate tax payer

My Expenses for running property including fees / mortgage interest etc come to around 500 per month (incl a 10% wear and tear).

So I have been working out my tax as follows:

£950 - £500 = £450 then £450 *40% = £180 due in Tax. So net profit = £270 per mth.

Based on budget -what would the new calc be?

Thanking you.

benjus

Peronihull wrote: »

Am I the only one confused??

I work my tax liability out quite simply and in line with the what I thought were the rules. Anyone care to walk me through the new process (or was I doing it wrong to start with??!?) -

So I have a rental property of which the rental income is £950 per month. I am a higher rate tax payer

My Expenses for running property including fees / mortgage interest etc come to around 500 per month (incl a 10% wear and tear).

So I have been working out my tax as follows:

£950 - £500 = £450 then £450 *40% = £180 due in Tax. So net profit = £270 per mth.

Based on budget -what would the new calc be?

Thanking you.

Impossible to tell since you haven't specified how much the mortgage interest is.

But in a nutshell, as a higher rate taxpayer you'll be able to claim tax relief for HALF of the mortgage interest, and you won't be able to claim the 10% W&T allowance (but you will be able to claim for specific maintenance costs instead).

Sillychuckie

This is very bad for me.

I have BTL property which I rent out to my family (mother and father in law), as a not-for-profit type thing.
I did it to help them, because they were down on their luck without much in the way of money, getting kicked out by their previous landlord and, in order to give them some resemblance of a 'home of their own', decided to buy a small flat and rent it to them 'at cost'.
Their rent covers my expenses only (insurance & mortgage interest [interest only]).
It works out about 6k in & out and nets off, so I don't lose out, and they don't have to move every year (or suffer demands of nasty landlords). They can even decorate how they like, and feel safe and secure in their permanent home.
About 4k of that 6k is mortgage interest costs, and as a high rate tax payer, I just net it off against their rental income.

With this change, I'm going to be liable to pay 25% more of the difference (4k), so thats £1000.
I have no choice but to pass it onto them (which they can not easily afford), so thats a rent increase of £83 per month (more actually, as that too will count as income).

I'm starting to think I did it all wrong and shouldn't treat it as as BTL at all, but, since they are family, just do it as a 'gift' and have them 'gift' me the costs... (but that might have looked like I was trying to evade/avoid tax), so I did it as a BTL.

Either way - this change will definitely hurt and may even push them to the brink of having to move out and join the benefits system. They can no longer afford to pay market rates.

SC

Conrad

I'm not worried. Rents will need to rise a bit and one can always find expenses to reduce the tax bill, for example if you buy say a new dishwasher for your own home put it down as a B2L expense. Split the income with your spouse and this keeps things lower still.

Someone mentioned interest rate rises will kill Landlords. Not really, any LL ought to be fixing for 5 years and then applying annual rent increases so that after 5 years you have quite a bit higher rent then and hopefuly would fix for another 5 years there.

A common mistake I encounter is LL's not applying the annual increase and the tenants getting used to this. It is a business not a charity, the tenant would not give you extra rent as some sort of charitable act of kindness so a LL must also not gift lower rent by way of not applying the annual increase. Remember if rates suddenly rise you cannot hike the rents by much in one go so you should be planning ahead and building your income for this eventuality.

PS - I offer a full noobie LL's personal advice service if anyone is interested, for a modest fee of course!

martinsurrey

Conrad wrote: »

I'm not worried. Rents will need to rise a bit and one can always find expenses to reduce the tax bill, for example if you buy say a new dishwasher for your own home put it down as a B2L expense. Split the income with your spouse and this keeps things lower still.

Someone mentioned interest rate rises will kill Landlords. Not really, any LL ought to be fixing for 5 years and then applying annual rent increases so that after 5 years you have quite a bit higher rent then and hopefuly would fix for another 5 years there.

A common mistake I encounter is LL's not applying the annual increase and the tenants getting used to this. It is a business not a charity, the tenant would not give you extra rent as some sort of charitable act of kindness so a LL must also not gift lower rent by way of not applying the annual increase. Remember if rates suddenly rise you cannot hike the rents by much in one go so you should be planning ahead and building your income for this eventuality.

PS - I offer a full noobie LL's personal advice service if anyone is interested, for a modest fee of course!

ouch 90% of your post is good, but you started out by proposing fraud.

"for example if you buy say a new dishwasher for your own home put it down as a B2L expense"

Peronihull

benjus wrote: »

Impossible to tell since you haven't specified how much the mortgage interest is.

But in a nutshell, as a higher rate taxpayer you'll be able to claim tax relief for HALF of the mortgage interest, and you won't be able to claim the 10% W&T allowance (but you will be able to claim for specific maintenance costs instead).

Thanks for this. Currently its on an interest only with at £350 per month.

What I am confused about is the fact that its not the total interest paid, I get to net off the rental income - will I now only be able to claim 20% of whats paid in mortgage interest as part of my deductions?

I get the 10% W&T allowance won't be there any more will just continue to itemise our exact expenditure.