New taxes on BTLs - hill of beans?

Bluebirdman_of_Alcathays

Shakin_Steve wrote: »

I'm not very well up on these things but, as far as can work out, landlords don't make a profit on renting out properties that they own. The payoff comes once the mortgage is paid, and they are rewarded for all their hard work with a property they own outright.

Nearly all LLs make profit? Otherwise it's just a big gamble on capital gains, and people aren't THAT stupid.

kinger101

Owning more of the asset due to paying down a mortgage with the rental income is still profit.

jdw2000

kinger101 wrote: »

I've no idea how you've come to your no tax figures, but I suspect the calculator is incorrect, or more likely, you've misunderstood something quite fundamental.

By definition, if there is a profit, the income is taxable. For higher rate taxpayers with a mortgage, they may still need to pay a tax on an accounting loss. The cap on interest deductions at basic rate only is being tapered on.

I don't think you'll be able to provide the Chancellor with much advice on taxation matters.

EDIT - a cursory glance at that tax calculator tells me it's about as useful as Anne Frank's drum kit.

I can see how my post was misleading.

I am saying that the changes in tax laws result in no NEW tax. She would still be paying £240 pa just as before. But no additional charges as a result of the new laws.

jdw2000

Crashy_Time wrote: »

How much is she borrowing to buy the house?

About £175K mortgage. £75K deposit from a re-financing of primary house.

jdw2000

Crashy_Time wrote: »

The 12k is her only income though?

No. £35K from her full-time job.

jdw2000

Shakin_Steve wrote: »

I'm not very well up on these things but, as far as can work out, landlords don't make a profit on renting out properties that they own. The payoff comes once the mortgage is paid, and they are rewarded for all their hard work with a property they own outright.

I thought many landlords just had interest-only mortgages.

kinger101

jdw2000 wrote: »

I can see how my post was misleading.

I am saying that the changes in tax laws result in no NEW tax. She would still be paying £240 pa just as before. But no additional charges as a result of the new laws.

That's because the new laws specifically targets higher rate tax buyers who are leveraged.

Ulfar

As I understand the changes she will end up paying 0% tax on £8000 of rental income and 20% on £2800 as she will be above the threshold for higher rate tax.

Happy to be corrected if I haven't got that straight.

This as others have said leaves nothing for interest rate rises, voids, maintenance, etc. I have also assumed this is an interest only mortgage as capital repayments do not attract the 20% tax rebate so 40% tax applies to this money.

£1200.00 costs seems low to me, maybe any landlords can shed light on whether this is a reasonable level. I would imagine costs will go up when letting fees to tenants are banned.

It also doesn't factor in a chancellor in the future reducing or eliminating the 20% tax credit on mortgage interest payments. We all know how the current government is treating tax credits.

kinger101

Ulfar wrote: »

As I understand the changes she will end up paying 0% tax on £8000 of rental income and 20% on £2800 as she will be above the threshold for higher rate tax.

Happy to be corrected if I haven't got that straight.

This as others have said leaves nothing for interest rate rises, voids, maintenance, etc.

£1200.00 costs seems low to me, maybe any landlords can shed light on whether this is a reasonable level. I would imagine costs will go up when letting fees to tenants are banned.

You're very very very wrong.

Ulfar

Care to comment on how it will really work.