BTL new tax conundrum

kiridoh

So after leaving aside my BTL project for some time , I'm now back on the market, and trying to figure out the new tax implications.

It seems a simple calculation, but couldn't find a decent website which takes into account the fact that I don't intend to have an interest-only mortgage, but rather include capital repayments.

My plan is as follows:
Purchase price: £255,000
Mortgage amt: £191,250
Mortgage rate: 3.8%
Monthly payment: £988.49 (25 years)

Just to double check my calcs at 40% income tax, could anybody please verify what would be the yearly tax after 2020 with a rental income of £1,000 per month (and explain how they got to that number)?

I know it's probably a dumb question, but I am getting some really weird figures so would like to make sure I am not doing something stupid :eek:

dimbo61

Don't worry about the Tax, no one will be giving you a BTL mortgage of £192,000 which costs £988 a month and you get a rental income of £1,000
Business plan !

kiridoh

Well, "rental income of £1,000" was just to make the calculation easy. Just put any number you like to work out the tax...

AnnieO1234

Do you mean £1,000 profit a month? Because otherwise your figures don't work. Xxx

kinger101

It can't be bothered to work out what your interest will be in 2020 on a repayment mortgage. And can't anyway, as I don't know when mortgage will start. If you're that lazy, being a landlord isn't for you. This is an illustration of how the rules work;

http://www.aspirationsaccountancy.co.uk/buy-to-let-mortgage-tax-changes/

That much leverage and that little gross profit sounds like a non-starter to me. The whole point of the rules was to force over-leveraged landlords out.

kiridoh

I mean £x of net amount paid by the tenant. It's only one figure! How doesn't it work?

kinger101

kiridoh wrote: »

I mean £x of net amount paid by the tenant. It's only one figure! How doesn't it work?

Well, for a start, the mortgage payments on a £191,250 mortgage over 20 years at 3.8% is actually £1,139 and not the £988.49 you've shown :rotfl:. Net of what for rent?

kiridoh

kinger101 wrote: »

It can't be bothered to work out what your interest will be in 2020 on a repayment mortgage. And can't anyway, as I don't know when mortgage will start. If you're that lazy, being a landlord isn't for you.

What part of "can somebody double check my calculations" was I not clear about? And where exactly to you see the laziness in the question?

The amortisation schedule is the easiest part, there are plenty of tools online, like this one. Total interest for the period Apr 2020-Apr 2021 is £6,454.75.

If you read my original post, my problem is that I couldn't find a website (including the one you sent) which includes the capital repayment part, possibly because most of the BTLs are interest only.

kiridoh

kinger101 wrote: »

Well, for a start, the mortgage payments on a £191,250 mortgage over 20 years at 3.8% is actually £1,139 and not the £988.49 you've shown :rotfl:.

Apologies, I meant to type 25. I’ll see if I can edit the post.

kiridoh

Celifein wrote: »

This doesn't sound like a BTL. It sounds sort of like you want a home you can eventually move into, but you can't afford the payments so you want someone to live in it and help you pay the mortgage off.

Great help, thank you.

kinger101

kiridoh wrote: »

What part of "can somebody double check my calculations" was I not clear about? And where exactly to you see the laziness in the question?

If you read my original post, my problem is that I couldn't find a website (including the one you sent) which includes the capital repayment part, possibly because most of the BTLs are interest only.

The capital repayment is irrelevant for tax purposes. I wasn't aware you'd provided any calculations to double check. Looking at your speadsheet, in 2020, the mortgage balance is around £170K. Which gives approx £6.5K of interest. The tax will be £12000 @ 40% = £4800 - 20% of interest (£1300) leaving you a tax bill of £3,500. On top of mortgage payments of £12K and all the other costs associated with being a LL. Of course, we don't know what the interest rates are in 2020.