New taxes on BTLs - hill of beans?

Crashy_Time

tim123456789 wrote: »

to stop even more piling in

Why would they want to stop them though?

booksurr

tim123456789 wrote: »

The technical terminology is that this is not a "tax credit", it is a business expense.

That they have restricted it to only being usable against the standard rate, does not change that

tim

the technical term is "tax reducer" since under the old system the interest charge was a business expense which was deducted before the net taxable profit was calculated, income - expenses = profit.

under the new system the interest charge gives rise to tax relief at 20% and that relief is then deducted from the amount of tax to pay, hence it is a tax reducer not a business expense. income - expenses = profit, profit x tax = tax liability, tax liability - tax relief = tax payable. The tax has been reduced, it has not been "expensed"

to that extent, although most would think of tax credits being for specific purposes rather than a generic term, calling it a credit is much closer than calling it an expense, however this debate is essentially over semantics

booksurr

jdw2000 wrote: »

The primary reason for this BTL, like most landlords, is the sale at the end. The annual rent is not intended to be a business by itself. It's a means to an end until such a time as the property is sold.

however, the wise investor never puts themselves in a position where they incur higher annual running costs for holding that investment than it generates itself in income

yes of course you can pick a capital growth stock market fund where the fund manager makes no promises over whether dividend income will cover the manager's annual charges, but if you do pick such a fund and therefore see the manager having to sell shares from your fund just to generate sufficient cash to cover their annual fees you have, IMHO, an extremely high attitude to risk and should be running your own investments, not paying a fund manager to take a cut from your capital

Crashy_Time

booksurr wrote: »

the technical term is "tax reducer" since under the old system the interest charge was a business expense which was deducted before the net taxable profit was calculated, income - expenses = profit.

under the new system the interest charge gives rise to tax relief at 20% and that relief is then deducted from the amount of tax to pay, hence it is a tax reducer not a business expense. income - expenses = profit, profit x tax = tax liability, tax liability - tax relief = tax payable. The tax has been reduced, it has not been "expensed"

to that extent, although most would think of tax credits being for specific purposes rather than a generic term, calling it a credit is much closer than calling it an expense, however this debate is essentially over semantics

In simple terms.....does the landlord get to keep more, or keep less of his/her profit? If they even make any profit, because I`m sure many don`t.

Crashy_Time

booksurr wrote: »

however, the wise investor never puts themselves in a position where they incur higher annual running costs for holding that investment than it generates itself in income

yes of course you can pick a capital growth stock market fund where the fund manager makes no promises over whether dividend income will cover the manager's annual charges, but if you do pick such a fund and therefore see the manager having to sell shares from your fund just to generate sufficient cash to cover their annual fees you have, IMHO, an extremely high attitude to risk and should be running your own investments, not paying a fund manager to take a cut from your capital

How many wise investors got into BTL though? I suppose I can see why the government wants to shut this down...:rotfl:

booksurr

Crashy_Time wrote: »

In simple terms.....does the landlord get to keep more, or keep less of his/her profit? If they even make any profit, because I`m sure many don`t.

that was not the point i was making

to answer your question in the simple terms you understand

for the basic rate taxpayer the tax changes have NO EFFECT

for the higher rate taxpayer the tax changes mean they PAY MORE tax

paying more tax obviously impacts the overall profitability of the investment

booksurr

Crashy_Time wrote: »

How many wise investors got into BTL though? I suppose I can see why the government wants to shut this down...:rotfl:

how many wise investors pay attention to internet crashers?

Crashy_Time

booksurr wrote: »

that was not the point i was making

to answer your question in the simple terms you understand

for the basic rate taxpayer the tax changes have NO EFFECT

for the higher rate taxpayer the tax changes mean they PAY MORE tax

paying more tax obviously impacts the overall profitability of the investment

Unless the changes push them into the higher bracket?

Crashy_Time

booksurr wrote: »

how many wise investors pay attention to internet crashers?

You could turn that round and say How many now struggling/panicking BTL`ers paid attention to internet crashers?
:rotfl:

Typhoon2000

This tax is nothing about shutting down BTL. People are going to need to rent and there needs to be landlords with property to let to them. This is just a revenue raising tax like any other.
As with any other bussiness, landlords will gradually pass on their costs to the customers. So tenents will foot the bill in the end.