mortgage relief on BTL changes in recent budget?

AlexMac

Thanks Martin- an earlier reply (the RLA tax calculator) worried me as it seemed to imply I'd pay more tax. But as I only pay 20% tax anyway, as income and profit on lettings are below the Higher rate tax threshold- you confirm I'm not affected.

Neither will the OP be... as they're on low income even with their profit (even if the mortgage isn't interest only so not all capable of being offset against income. In fact if the mortgage is interest only, the OP must be making a loss as I bet there are other expenses! Lets hope they're getting big capital gains!)

martinsurrey

cloo wrote: »

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!

AlexMac wrote: »

Thanks Martin- an earlier reply (the RLA tax calculator) worried me as it seemed to imply I'd pay more tax. But as I only pay 20% tax anyway, as income and profit on lettings are below the Higher rate tax threshold- you confirm I'm not affected.

Neither will the OP be... as they're on low income even with their profit (even if the mortgage isn't interest only so not all capable of being offset against income. In fact if the mortgage is interest only, the OP must be making a loss as I bet there are other expenses! Lets hope they're getting big capital gains!)

don't confuse current HR tax payers with new world HR tax payers, many people who are currently basic rate payers will become HR.

example.

Current world
John earns £35k a year in his day job
he's an accidental landlord - rents out his house for £1k a month with mortgage interest of £800 a month (assume no other expenses), making a net profit of £200 a month or £2400 a year.

total taxable income £37.4k

so a BASIC rate tax payer

New BTL world

John earns £35k a year in his day job
he's an accidental landlord - rents out his house for £1k a month with mortgage interest of £800 a month (assume no other expenses), making a net profit of £1,000 a month or £12,000 a year BEFORE mortgage interest.

total taxable income £47.0k

so a HIGHER rate tax payer

he'll then get a tax allowance for mortgage interest of (800x12@20%) = £1,920 against this tax bill which will include tax at the higher rate, he will be worse off.

tomtontom

martinsurrey wrote: »

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

OP's issue isn't his tax liability, it's that he's using his current "expenses" to minimise his income for benefit purposes - a big loophole the govt are now closing.

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

To respond to the OP's post, per the link I have provided below and martinsurrey'smartinsurrey's very helpful contribution, as long as you do not go into the 40% tax band (which you will not) you will have no extra tax to pay.

havingaball74

I may be opting to be a BLT landlord. I earn £37k a year in my job and will theoretically receive £550 a month rent. That makes £6660 per year (mortgage balance of £42K). I believe that takes me into the 40% tax bracket but do not understand how the allowances work and whether that would affect me if I opted for BTL. Can anyone help? My brain is melting.

caronoel

havingaball74 wrote: »

I may be opting to be a BLT landlord. I earn £37k a year in my job and will theoretically receive £550 a month rent. That makes £6660 per year (mortgage balance of £42K). I believe that takes me into the 40% tax bracket but do not understand how the allowances work and whether that would affect me if I opted for BTL. Can anyone help? My brain is melting.

The RLA link above should inform your decision.

Make sure you add a little Branstons to your BLT. It really brings out the flavour.

sequence

It does seem unlikely that the interest is so high. That's an expensive mortgage...