how does the budegt affect BTL?

marlot

jjlandlord wrote: »

From today's reaction on the shares price of building companies, the market seems to think that this will mean less homes being built...

That's going to help.

That's code for "we think prices will level out or fall".

Having worked for a housebuilder, they'll happily sell to anyone. By taking some buyers out of the market, they may have to trim the sale prices.

varghesejim

jjlandlord wrote: »

From today's reaction on the shares price of building companies, the market seems to think that this will mean less homes being built...

That's going to help.

the market sentiment to the building companies mean house building is not going to be profitable as it was. It can only happen when house prices reduce. That might help.

benjus

Peronihull wrote: »

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?

Currently you receive £350 in rent (+£600 which I'll ignore for this calculation) and use it to pay the mortgage interest.

You pay 40% tax on this £350, i.e. £140. Then, because you're using it to pay mortgage interest, you receive tax relief at 40%, i.e. £140 - so it cancels out.

After these changes you will still pay 40% tax on this £350, i.e. £140. But you will receive tax relief at 20%, i.e. £70. So you'll have an extra £70 tax bill for mortgage interest.

the_hornet_2

The way I see it is that as a 40% tax rate payer, in affect I am currently getting £40 for 'free' by not having to pay that tax rate on every £100 of interest I am paying on my BTL (this is because I offset the whole thing against the income/profit). When the budget kicks in I will in affect only be allowed £20 for 'free' by off setting the interest.

- So for every £100 I pay in interest I will now have to pay an extra £20 in tax. That is correct isn't it?

Thrugelmir

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.

From the Exchequers perspective still a net gain in tax take. As money has to be spent in order to offset. Previously there was no requirement to spend anything and receive a 10% allowance.

For a dishwasher there'll be a nice lump of VAT paid across.

jimjam69

Like Peronihull I'm very confused - please would someone explain in simple terms what is meant by Mortgage Relief.


I currently rent out my previous residence and have a buy to let mortgage. I fill out an annual tax return online. Every May I look at how much my expenses have been including Mortgage/insurance/10% wear and tear etc and deduct this from the rent received giving me a figure which is my profit. The online tax return tells me how much the tax liability is and I pay it - I do not claim for any Mortgage relief ( I am just a in the 40% tax band).


Am I just getting confused with the language employed here or am I a Numty. I have spent an hour on the phone to HMRC and I'm not sure if they fully understand either.

Givens

jimjam69 wrote: »

Like Peronihull I'm very confused - please would someone explain in simple terms what is meant by Mortgage Relief.


I currently rent out my previous residence and have a buy to let mortgage. I fill out an annual tax return online. Every May I look at how much my expenses have been including Mortgage/insurance/10% wear and tear etc and deduct this from the rent received giving me a figure which is my profit. The online tax return tells me how much the tax liability is and I pay it - I do not claim for any Mortgage relief ( I am just a in the 40% tax band).


Am I just getting confused with the language employed here or am I a Numty. I have spent an hour on the phone to HMRC and I'm not sure if they fully understand either.

Just judging by previous posts the easiest way of understanding it is that you will pay an extra £20 in tax for each £100 you pay in interest payments. If your mortgage is £400 interest only a month you will pay an extra £80 a month in tax so £960 across the year.

jimjam69

Thanks Givens.


Would I be correct in assuming that the self assessment online would automatically take this into account - i.e. the tax relief on mortgage payments is not something that I have to work out or apply myself?

Innys1

jimjam69 wrote: »

Thanks Givens.


Would I be correct in assuming that the self assessment online would automatically take this into account - i.e. the tax relief on mortgage payments is not something that I have to work out or apply myself?

Yes, it would.

Ajith86

I am a small investor and have 5 buy to let houses.. If I form a limited company and sell these houses to the company, will the loss of mortgage relief still affect the company? I am aware of stamp duty, higher accountant fees that I will incur? I am also aware that there is no capital gains allowance for a company.....
I am a higher rate taxpayer.
Thank you for your help.