BTL changes. ..will this affect my tax credits?

scousedave

I'm a single dad whose children live with me permanently and have a couple of BTL properties.
At the moment I can offset my mortgage against my rental so basically no profit whatsoever so my income is just my employment of 16k annually.
I am concerned that when thre tax relief on BTL mortgage stops will the rental received be classed as income (which needs to pay the mortgage)and affect and reduce my working and child tax credits?
Thank you so much

northerntwo1

Why would it affect you as you aren't a higher rate tax payer?

tomtontom

On your £1,800 rental income you'll be able to claim 20% relief, the rest will be deemed profit. Seems fair really?

Edit - you may well be moved to Universal Credit by 2017, so capital will be an issue also.

northerntwo1

tomtontom wrote: »

On your £1,800 rental income you'll be able to claim 20% relief, the rest will be deemed profit. Seems fair really?

Edit - you may well be moved to Universal Credit by 2017, so capital will be an issue also.

Can't believe they can claim it now!!!

sheramber

just one point you cannot claim any capital repayment of your mortgage, only the interest paid. So, unless you have an interest only mortgage you cannot claim all your mortgage payment against your income.

teddysmum

sheramber wrote: »

just one point you cannot claim any capital repayment of your mortgage, only the interest paid. So, unless you have an interest only mortgage you cannot claim all your mortgage payment against your income.

I was just thinking the same. You can't use the taxpayer to buy your property; just to help keep you out of debt, short term.

scousedave

Not trying to.use the taxpayer to buy a property....like any business you should only pay tax on profit

tomtontom

northerntwo1 wrote: »

Can't believe they can claim it now!!!

Plus the mortgage interest he's getting paid on his own property.

Roll on Universal Credit ...

leveller2911

tomtontom wrote: »

Plus the mortgage interest he's getting paid on his own property.

Roll on Universal Credit ...

Fair point.


Its about time there is a level playing field when buying property.People should buy houses to live in and not as an "investment".....

_CC_

You can only offset the mortgage interest, not the entire mortgage.

Things in the budget that may affect you:

From April 2016, the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets. The government will publish a technical consultation before the summer.

The government will restrict the relief on finance costs that individual landlords of residential property can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017.

But, as others have mentioned, you're on borrowed time with regards to tax credits because Universal Credit will replace it and that has a capital limit so you'll likely be entitled to nothing given the likely equity you have.

_CC_

I know it's not the question you asked, but the offsetting the mortgage against your tax bill is puzzling.

You say you make no profit from the two BTLs, so this either means

1) you're wrongly offsetting the entire capital and interest against your income

or,

2) you have an interest only mortgage and the rental income is just covering this. In which case, won't you have a problem if/when remortgaging, as I thought lenders require the rent to cover 125% of the repayment? And, what are your plans for clearing the capital at the end of the term? Be forced to sell up at that specific time and incur CGT?