Consent to Let

w00519772

I was reading about how the tax liability will increase from April 2017 for landlords here: http://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-relief/

Say I am currently a higher rate tax payer.

The way I understand it is as follows. As it stands say I earn £650PCM in rent and I have a 80,000 mortgage at 3.25% interest. Here is the current tax liability:

12*650=7800
(3.25/100)*80000=2600
7800-2600=5200
(40/100)*5200=2080 tax

Therefore my profit would be: 7800-2080=5,720 profit

Under the new rules:

(40/100)*7800=3120 tax
7800-3120=3,960 profit

So a difference of: £1,760. Is that correct?

I read that you can create a limited company, however a stamp duty levy is attracted if you transfer ownership from yourself to the company.

Have I understood all this correctly?

w00519772

Are my calculations in the post immediately above correct? I believe they are based on this webpagehttps://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords:

AnotherJoe

w00519772 wrote: »

I was reading about how the tax liability will increase from April 2017 for landlords here: http://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-relief/

Say I am currently a higher rate tax payer.

The way I understand it is as follows. As it stands say I earn £650PCM in rent and I have a 80,000 mortgage at 3.25% interest. Here is the current tax liability:

12*650=7800
(3.25/100)*80000=2600
7800-2600=5200
((40/100)*(5200-4000))=2080 tax <

---

Why minus £4,000 ? Where does that come from?

Therefore my profit would be: 7800-2080=5,720 profit

Under the new rules:

(40/100)*7800=3120 tax
7800-3120=3,960 profit

So a difference of: £1,760. Is that correct?

I read that you can create a limited company, however a stamp duty levy is attracted if you transfer ownership from yourself to the company.

Have I understood all this correctly?

Not sure see the bit in red above.

w00519772

AnotherJoe wrote: »

Not sure see the bit in red above.

I have amended my post. Do the calculations look correct now?

w00519772

I called HMRC to see if the calculations above are correct, but they were unable to help. Is anyone able to advise whether the calculations are correct?

foxy-stoat

w00519772 wrote: »

I called HMRC to see if the calculations above are correct, but they were unable to help. Is anyone able to advise whether the calculations are correct?

From April 2017 you can only claim 75% of the interest as tax relief, 2018 50%, 2019 25% and 2020 on 0%.

So taxble profit your about correct, apart from deducted your expenses, landlords building insurance, annual gas safe certificate, EPC and other letting fees including agents fees and repairs.

If as you say your mortgage has only 3 years left, is it on an interest only mortgage, are you going to sell it in 3 years or do you have a repayment vehicle?

foxy-stoat

w00519772 wrote: »

I have generated a quote here: http://www.legalandgeneral.com/insurance/landlord-insurance/

The result was: £566.94 per year or £51.27 per month (building insurance, contents insurance and rent guarantee for a property in Lincolnshire) assuming rent of £700 per month. This seems low based on what Foxy-Stoat said above. Is it low?

Your talking about insurance, my post was talking about rent payments - different things.