how does the budegt affect BTL?

Thrugelmir

You'll potentially realise a CGT liability in transferring the properties to the Company.

You won't be able to transfer the mortgages though.

SuperSaver123

I have gone through very quickly through all the posts and cannot see this being explained.

If I am a basic rate taxpayer at the moment but just under the threshold and generate a small rental income which if the interest isnt fully deductible would make me go over the threshold - does that mean I become higher rate taxpayer and interest is only deductible at 20%?

If so I think there will be quite a few people now becoming higher rate taxpayers!

I may want to cancel my private medical healthcare as this may just make me go under the threshold. Isn't that just stupid??

SuperSaver123

What I mean is that previously if I was just about to go over the limit, it wouldn't matter that much as it would be just the extra amount subject to 40%. Whereas now with my interest being really high on my BTL, I lose out a lot!

Pincher

SuperSaver123 wrote: »

What I mean is that previously if I was just about to go over the limit, it wouldn't matter that much as it would be just the extra amount subject to 40%. Whereas now with my interest being really high on my BTL, I lose out a lot!

Reduce the rental income by spending money on the Buy-to-Let. Replace the gutter, buy a new washing machine. Expenses are fully deductible.



Re-mortgage to get a better interest rate. The arrangement fee and costs are fully deductible. The irony is, less interest increases your net income.

jjlandlord

Appliances like washing machines are not allowables expenses.

Also, the new tax relief reduction will apply to all finance costs (arrangement fees, etc), not only interests.

Pincher

jjlandlord wrote: »

Appliances like washing machines are not allowables expenses.

Also, the new tax relief reduction will apply to all finance costs (arrangement fees, etc), not only interests.

Oh oh. I have a flat, which came from the developer with appliances built-in, and I let it furnished, i.e. sofa, beds, curtains (on 2nd set for £2,500). Most of the appliances have been replaced, including a Direct Thermal Store hot water cylinder (£1,600). We are talking over £20,000 of stuff, and I shouldn't have claimed?


Regarding the arrangement fees etc. I assume you mean Box 26, "Loan interest and other financial costs", under Property Expenses, in the HMRC Tax return form. As it is all lumped into one number, the system will have to treat the whole amount as limited to Basic Rate relief. As George Osborne was saying Buy-To-Let interest, I thought you would distinguish the arrangement fee and conveyancing cost by putting them under Box 27, "Legal, management, and other professional fees".


How is anyone supposed to getting it right under Self Assessment, I'll never know.

ognum

Pincher wrote: »

Oh oh. I have a flat, which came from the developer with appliances built-in, and I let it furnished, i.e. sofa, beds, curtains (on 2nd set for £2,500). Most of the appliances have been replaced, including a Direct Thermal Store hot water cylinder (£1,600). We are talking over £20,000 of stuff, and I shouldn't have claimed?


Regarding the arrangement fees etc. I assume you mean Box 26, "Loan interest and other financial costs", under Property Expenses, in the HMRC Tax return form. As it is all lumped into one number, the system will have to treat the whole amount as limited to Basic Rate relief. As George Osborne was saying Buy-To-Let interest, I thought you would distinguish the arrangement fee and conveyancing cost by putting them under Box 27, "Legal, management, and other professional fees".


How is anyone supposed to getting it right under Self Assessment, I'll never know.

I believe built in appliances are detectable.

mik82

Ajith86 wrote: »

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.

1) Potential CGT liability as mentioned previously to transfer in to limited company.
2) Interest rates within a ltd company may be higher, so you'll need a higher yield to be viable. (there's a higher risk to the bank, as by nature the liabilities of the company are limited)

silvercar

Ajith86 wrote: »

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.

I had a chat with my business bank manager about this.

The mortgage available would be possible at about 70% LTV, 125% rent cover of interest on the mortgage at 5%. Actual mortgage rate payable is about 0.75% higher than BTL standard rates.

This would be subject to review after 5 years. At which point the bank have the right to call in the mortgage or limit the amount lent to a lower LTV. Of course if property values increase the LTV would drop in any case, if not there could be an issue. The manager was saying that if this is a business, it should be generating a profit and some of that profit should be used to reduce loans.

Zoology_Dragon

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).

Why on half the interest? I thought I'd followed people's examples (thanks everyone) but this has thrown me. I own a BTL jointly with my husband - I'm a 20% rate taxpayer, he is 40% so this change will affect us and I want to make sure I understand it.