New buy to let tax on low income

jamels2

Can anyone confirm that if my intention from property is to replace my wages, which is about £2k a month, with rental income, then will the tax changes affect me?
My aim is 2-3 properties about £800 percent each, as I have more rental income I plan to work less hours.
So will the tax affect me if I never plan to enter the higher tax payer band??

booksurr

since the removal of higher rate tax relief for higher rate taxpayers (your "tax changes") and its restriction to only the basic rate means what it says, do you really need to ask this question?

if you plan to give up work and live off rental profit it would appear you need to be a bit more clued up on how your tax works. How do you "plan" not to enter higher rate unless you actively plan to make less profit, if so why are you going into business in the first place. The whole point of being higher rate taxpayer is you make more money than a basic rate taxpayer and 60% of something is much better than 100% of nothing

Crashy_Time

jamels2 wrote: »

Can anyone confirm that if my intention from property is to replace my wages, which is about £2k a month, with rental income, then will the tax changes affect me?
My aim is 2-3 properties about £800 percent each, as I have more rental income I plan to work less hours.
So will the tax affect me if I never plan to enter the higher tax payer band??

What do you mean here?

Cakeguts

I would suggest that you do a quick sum to work out how much you would have to pay for each property to earn £800 pcm and then work out how much mortgage you would need for each property.

jamels2

Well I am looking at properties at 200k each which rent for £8-900 a month and with mortgages about £300 a month interest only.
My overall plan is to work less hours but still have an income. So this income gradually shifts from my labour to rental income over the years...

teddysmum

jamels2 wrote: »

Can anyone confirm that if my intention from property is to replace my wages, which is about £2k a month, with rental income, then will the tax changes affect me?
My aim is 2-3 properties about £800 percent each, as I have more rental income I plan to work less hours.
So will the tax affect me if I never plan to enter the higher tax payer band??

I notice, from other threads, that you are a postman, so can you adjust your hours as you please and are you able to find work to make up for times when properties are void, someone fails to pay rent and refuses to leave or you have vandalism on the premises ?

marliepanda

jamels2 wrote: »

Well I am looking at properties at 200k each which rent for £8-900 a month and with mortgages about £300 a month interest only.
My overall plan is to work less hours but still have an income. So this income gradually shifts from my labour to rental income over the years...

Honestly this sounds a bit like a pipe dream...

bigfreddiel

Sounds risky to me, there will be expenses he hasn't thought of to account for on top of the mortgages at roughly £900/month.

For example:
No tenants
Tenants not paying
Property maintenance
Insurance
Legal fees
Licences
Interest rates going up
Dodgy tenants -cannabis factories
Subletting by tenants

This list could go on and on, but I wouldn't do it

Good luck fj

Cakeguts

So for a buy to let mortgage you will need a deposit of at least 25% so that is roughly £50K deposit only. Then you have all the other buying costs. Have you checked that you can get an interest only mortgage? Since you are going to need about £150K in cash just for the deposits on the 3 properties why don't you just buy a £150K property with cash and forget the mortgage?

kingoranks

Hey jamels,

Get a professional advice.

buglawton

You need to be sitting on a pretty large cash pile already for the idea to work at all. Your idea of the rental yield on £200k properties is on the very optimistic side. All rental income will be income-taxed as usual, to do the maths just look at a standard online tax calculator, enter your expected income from all sources added together and see how much tax you'll be paying.
Finally don't forget that within a few years most interest on the interest payments won't be tax deductible.