BTL tax changes to cost London Landlords over £1B a year

cells

~700,000 BTLs in London.

I figure wear and tear loss is ~£350 on average = ~£245 million

And I guess the interest rate offset changes will collect an additional = ~£800 million*

Does the budget reveal how they think changes will impact taxes collected? I would be interested to have a look at the treasury estimates but cant find anything on google (probably as I am searching for the wrong thing)




*Assuming ~£100B mortgage outstanding with higher rate BTL owners in London. ~£4B annual interest. therefore ~£800m additional tax.

chewmylegoff

https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015

Section 6.1

PasturesNew

Don't worry - they will just put the rents up if they feel hard done by.

cells

Thanks, looks like they figure the finance relief changes will bring in ~£665m a year near the end of the parliament.

That seems low. £665m at 20% differential = £3.3B @ 4% interest = £83B

Surely there is more than £83B worth of BTL loans in the system?

ukcarper

cells wrote: »

Thanks, looks like they figure the finance relief changes will bring in ~£665m a year near the end of the parliament.

That seems low. £665m at 20% differential = £3.3B @ 4% interest = £83B

Surely there is more than £83B worth of BTL loans in the system?

Is it not possible that some of landlords are basic rate tax payers.

cells

£170m more tax in abolishing wear and tear also seem quite conservative.

A London rental now getting £2k wear and tear costs, might have only say £0.5k cost of replacements. That £1.5k difference is a £600 tax take on higher rate payers or a £300 tax take on lower rate payers

London alone has >700,000 BTLs which means £210m - £420m alone in London

cells

ukcarper wrote: »

Is it not possible that some of landlords are basic rate tax payers.

Sure and some landlords will own outright so they are not going to pay more even if higher rate tax payers

But with something like 5-6 million BTLs it seems odd to assume only £80B or so of loans are taken by higher rate tax payers.

chewmylegoff

cells wrote: »

£170m more tax in abolishing wear and tear also seem quite conservative.

A London rental now getting £2k wear and tear costs, might have only say £0.5k cost of replacements. That £1.5k difference is a £600 tax take on higher rate payers or a £300 tax take on lower rate payers

London alone has >700,000 BTLs which means £210m - £420m alone in London

The wear and tear allowance can only be claimed for fully furnished properties and is not available when the property is held within a corporate envelope.

Furthermore the wear and tear allowance only has a tax impact if you are making a profit after real costs as you cannot offset a taxable loss on renting out residential property against other income. I expect that a few percent of London BTL landlords are making a loss.

Generali

There are a lot of unknowns in there. Clearly the higher the interest rate, the higher the tax loss under the new rules.

It is my understanding that an awful lot of BTLs are owned mortgage free. I mean if the end game is to earn a house or two outright in order to provide an income in retirement then a lot of BTLs will have their mortgage partly or entirely paid down.

I'll try to find the numbers.

Gavin234

The trend is clear. Going to get more expensive for LLs in the futre

wotsthat

cells wrote: »

Sure and some landlords will own outright so they are not going to pay more even if higher rate tax payers

But with something like 5-6 million BTLs it seems odd to assume only £80B or so of loans are taken by higher rate tax payers.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443195/Policy_costings_summer_budget_2015.pdf

Page 21...

Not much in the way of further detail but...

The main uncertainty in this costing relates to the size of the tax base and the behavioural response.