mortgage relief on BTL changes in recent budget?

scousedave

Can you pls help.
I currently rent out 3 properties at approx £1, 800 pcm and my mortgage is roughly the same so declare little or no profit.
How will the changes in the budget affect me pls?
Just to add I have a annual income of 16k
Thank yoy

theartfullodger

Are you just claiming mortgage interest or all mortgage payments?? Only interest is legal


Suggest you get a new calculator: £1.8kx12 is £21.6k income not £16k income - or did you mean you also bring in (work, car-boots, eBay etc..) another £16k as well.


Your tax payment will go up to be used by this lot as they see fit.

brit1234

3 at £1,800 a month each, yes you will have to pay more tax.

Are with the group of landlords selling up, not sure what you will do, or the group risking putting rents but maybe facing increased voids?

caronoel

scousedave wrote: »

Can you pls help.
I currently rent out 3 properties at approx £1, 800 pcm and my mortgage is roughly the same so declare little or no profit.
How will the changes in the budget affect me pls?
Just to add I have a annual income of 16k
Thank yoy

You can run the numbers here:
https://www.rla.org.uk/taxcentre/tax-calculator.shtml

Overall though, I doubt many land lords will be out of pocket on this, as it will only drive rents up even further.

Innys1

caronoel wrote: »

You can run the numbers here:
https://www.rla.org.uk/taxcentre/tax-calculator.shtml

Overall though, I doubt many land lords will be out of pocket on this, as it will only drive rents up even further.

Yes, if the pool of properties available for rent shrinks. I'm not sure that's going to happen - any rented properties sold are likely to be bought by existing landlords.

Alternatively, all the landlords may choose to raise their rents in response to this legislation. That may happen in popular areas but in others, landlords that are prepared to swallow this additional cost will make hay.

caronoel

Innys1 wrote: »

Yes, if the pool of properties available for rent shrinks. I'm not sure that's going to happen - any rented properties sold are likely to be bought by existing landlords.

Alternatively, all the landlords may choose to raise their rents in response to this legislation. That may happen in popular areas but in others, landlords that are prepared to swallow this additional cost will make hay.

why do you think any properties sold will be snapped up by existing LLs rather than owner occupiers?

To be honest, this is a disastrous and purely populist policy from the government.

In a growing economy, any market wide cost increase such as a tax rise, will be passed on directly to consumers. Just look at how quickly tax rises on booze, petrol or fags are passed through.

They tried removing interest relief for landlords in Ireland in the early 2000s. Result was a rise in both rents and in tax evasion from landlords and tenants agreeing under the table arrangements. The policy was quickly reversed.

In summary, the likely effect will be more upward pressure on rents and a move by landlords to acquiring properties through more tax efficient vehicles such as companies.

alchemist.1

caronoel wrote: »

why do you think any properties sold will be snapped up by existing LLs rather than owner occupiers?

To be honest, this is a disastrous and purely populist policy from the government.

In a growing economy, any market wide cost increase such as a tax rise, will be passed on directly to consumers. Just look at how quickly tax rises on booze, petrol or fags are passed through.

They tried removing interest relief for landlords in Ireland in the early 2000s. Result was a rise in both rents and in tax evasion from landlords and tenants agreeing under the table arrangements. The policy was quickly reversed.

In summary, the likely effect will be more upward pressure on rents and a move by landlords to acquiring properties through more tax efficient vehicles such as companies.

In places like London you will be able to but elsewhere i'm not sure the price increase will hold.

martinsurrey

scousedave wrote: »

Can you pls help.
I currently rent out 3 properties at approx £1, 800 pcm and my mortgage is roughly the same so declare little or no profit.
How will the changes in the budget affect me pls?
Just to add I have a annual income of 16k
Thank yoy

fag packet calcs incoming
Assumptions
£16k employment income
£64.8k rental income
£64.8k mortgage interest cost (I don't believe this is all interest but I don't know any better so will run with it)
2015/16 tax rates

No other tax code adjustments

Current Taxable Income

£16k+£64.8k-£64.8k = £16k

Income Tax paid on £16k =£1,080

Taxable Income in new BTL world

£16k+£64.8k = £80.8k

Income tax charge on £80.8k = £21,723

less BTL mortgage tax allowance of (64.8k@20% £12,960

Income tax paid in new world = £8,763

Extra income tax due to new BTL rules (£8,763-£1,080) = £7,683

(thats a pretty big fag packet)

ognum

martinsurrey wrote: »

fag packet calcs incoming
Assumptions
£16k employment income
£64.8k rental income
£64.8k mortgage interest cost (I don't believe this is all interest but I don't know any better so will run with it)
2015/16 tax rates

No other tax code adjustments

Current Taxable Income

£16k+£64.8k-£64.8k = £16k

Income Tax paid on £16k =£1,080

Taxable Income in new BTL world

£16k+£64.8k = £80.8k

Income tax charge on £80.8k = £21,723

less BTL mortgage tax allowance of (64.8k@20% £12,960

Income tax paid in new world = £8,763

Extra income tax due to new BTL rules (£8,763-£1,080) = £7,683

(thats a pretty big fag packet)

Hmm, I think the op is saying his total rent for the three properties is £1800 per calendar month. Making total income if fully let £21,600 per annum

martinsurrey

ognum wrote: »

Hmm, I think the op is saying his total rent for the three properties is £1800 per calendar month. Making total income if fully let £21,600 per annum

oops

in which case his tax liability wont change from now as

Current Taxable Income

£16k+£21.6-21.6K = £16k

Income Tax paid on £16k =£1,080

Taxable Income in new BTL world

£16k+£21.6k = £37.6k

Income tax charge on £37.6k = £5,400

less BTL mortgage tax allowance of (21.6k@20% £4,320

Income tax paid in new world = £1,080

Extra income tax due to new BTL rules (£1,080-£1,080) = £nil

logic is his rent net of non interest expense added to his other income does not take him above the HR tax threshold

cloo

Yes, I was going to say I thought the change was only for higher-rate tax payers, and sounds like the OP isn't one. But I would say to the OP to watch out for going over that threshold!