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Accidental landlord and new tax rules

Hello all, I wonder if anyone out there can offer some advice,

I bought as a first time buyer 10 years ago, and my house is currently worth approximately the same as I bought it for. Not the best. I have got about 25% capital in the house, having bought with a 10% deposit.

Just over 4 years ago I had to move job and location, and I rented out my house on a consent-to-let permission from my lender. Just under 2 years ago I changed the mortgage on my house to a lower rate buy-to-let mortgage which is on a fixed term until March.

The rent I receive on my property just about covers the mortgage payments. I am currently in rented accommodation which is about the same rent as my mortgage. But, of course, I pay tax on my rental income, minus the usual allowances etc.

Hope you're still with me at this point...

My question is about the new tax rules for landlords from 2017-18 onwards. I am confused by them, I know that mortgage interest will no longer be eligible to offset against rental income, but there will be a 'sliding scale' of credits for a period of time. will this affect me as an accidental landlord with my situation?

I am trying to decide whether to sell my house this year or whether to stay put in difficult circumstances. I would love to buy nearer to where I live, but who knows what will be happening with markets, of course....and my income hasn't increased either....

Grateful for any constructive wisdom from you experts out there, or anyone else in similar circumstances.

Thank you!
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Comments

  • booksurr
    booksurr Posts: 3,700 Forumite
    edited 17 January 2017 at 2:26AM
    you are not an accident, you are a landlord fair and square and all landlord tax rules apply to all landlords.

    are you are higher rate taxpayer: yes / no???
    if yes then the rules will impact you

    if not then they may still impact you depending how how close you are to the higher rate tax threshold of £43,000 (PA £11,000 + basic rate bracket £32,000) when the rental income less costs excluding the mortgage interest cost is added to your gross (pre tax, post pension contributions) salary. If that "total income" is more than £43,000 you are now a higher rate tax payer and the rules matter. If the total is less than 43,000 you remain a basic rate taxpayer and can ignore the rules

    to save me tying it all out again here is a similar question with some figures from another person
    http://forums.moneysavingexpert.com/showpost.php?p=71914047&postcount=1

    here is the answer showing how it will work where the total income is now into the higher rate tax bracket

    http://forums.moneysavingexpert.com/showpost.php?p=71916077&postcount=31

    as you realise the change is phased in over 4 years
    in 17/18, if all 4,800 interest falls into the HR bracket, only 25% of it is capped so 4800 x 25% x 20%. The rest is deducted as under the old rules
    in 18/19 4800 x50% x20% is capped. The rest is deducted as under the old rules
    in 19/20 4800 x 75% x 20% is capped. The rest is deducted as under the old rules
    in 20/21 all is capped so 4800 x 20%. There is nothing to deduct under the old rules as they have now ceased to exist.

    read the link to the .gov examples
  • Accidental?

    I'd say before doing anything you need to invest in a dictionary..
  • AdrianC
    AdrianC Posts: 42,189 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper
    LisaV wrote: »
    I rented out my house on a consent-to-let permission from my lender.

    Ignore those who are poo-poohing your "accidental landlord" status. I'm sure finding you'd moved house, gained CtL from your lender, and found a tenant must've been a real surprise when you woke up in a different bed. I sympathise entirely.

    Unfortunately, the taxman doesn't differentiate between people in your unfortunate situation and those despicable, rapacious Rachmanns who made a conscious decision to rent a property. Fortunately, though, they do separate those who actually have a viable investment from people like you by taxing profits rather than income. However, yes, it's true that if you're well-enough paid to be paying higher-rate tax, that your tenant's subsidy of your pension investment will be squeezed a bit. If that means that you decide that this poorly-thought through business venture really isn't terribly successful, then I suspect that you'll find the government will see that as it having done the very job it was intended to do.
  • chucknorris
    chucknorris Posts: 10,795 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 17 January 2017 at 10:51AM
    booksurr wrote: »
    you are not an accident
    sparky130a wrote: »
    Accidental?

    I'd say before doing anything you need to invest in a dictionary..

    Accidental landlord is a phrase accepted and used by the treasury and is defined as landlords who did not buy the property initially for businesses purposes (like I did), they ended up as landlords due to a change in circumstances, rather than by buying to let. This does have an impact under European law:

    https://www.mortgagestrategy.co.uk/issues/online-september-2014/treasury-settles-on-accidental-landlord-definition/

    Of course an accidental landlord would not be treated any differently under the new tax laws restricting the tax relief on mortgage interest. But that does not mean that there is no such thing as an accidental landlord, it is an accepted and recognised type of landlord, who exist due to particular circumstances that lead to the letting of their property.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • csgohan4
    csgohan4 Posts: 10,600 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Photogenic
    But the OP had the option to sell or be a LL, the OP chose the latter, so technically the OP is not accidental.


    Accidental implies no other choice such as inheritance, even then they could choose to sell.


    If I was given a house as inheritance, I wouldn't want to become a LL, too much hassle both legal, tax and time.
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

    G_M/ Bowlhead99 RIP
  • chucknorris
    chucknorris Posts: 10,795 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    csgohan4 wrote: »
    But the OP had the option to sell or be a LL, the OP chose the latter, so technically the OP is not accidental.


    Accidental implies no other choice such as inheritance, even then they could choose to sell.


    If I was given a house as inheritance, I wouldn't want to become a LL, too much hassle both legal, tax and time.

    That isn't the definition of an accidental landlord used by the treasury and others, see my link.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • csgohan4 wrote: »
    but the op had the option to sell or be a ll, the op chose the latter, so technically the op is not accidental.


    Accidental implies no other choice such as inheritance, even then they could choose to sell.


    If i was given a house as inheritance, i wouldn't want to become a ll, too much hassle both legal, tax and time.
    +1

    Words do not mean what the government says they mean: (e.g. "Universal Credit" - not universal, no credit to anyone IMHO..)

    Best regards to all!
  • Guest101
    Guest101 Posts: 15,764 Forumite
    That isn't the definition of an accidental landlord used by the treasury and others, see my link.



    Because the treasury says it, it must be true?
  • chucknorris
    chucknorris Posts: 10,795 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 17 January 2017 at 12:34PM
    Guest101 wrote: »
    Because the treasury says it, it must be true?

    No, that isn't what I am saying (read my initial post), what I am saying is that the phrase accidental landlords has a defined meaning accepted by the treasury and others.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • booksurr
    booksurr Posts: 3,700 Forumite
    That isn't the definition of an accidental landlord used by the treasury and others, see my link.
    Yes we all know that accidental LL is an immediately recognised concept and that it is a perfectly valid choice for a person to make in certain circumstances, but its use is often to differentiate someone from the more perjorative word "LL", as though the accident is somehow deserving of sympathy and different treatment, whereas a full blown LL is deserving of contempt for being a profiteer. Yet each is doing it solely because they think they can make more money by remaining invested in property.

    I am an accidental LL as I actively chose to retain an inherited property to let it. My "accident" was to have made a decision as to the economics of sell now or later, to retain a foothold in an area I may wish to return to later, and to make sure such retention was at least cost neutral on an annualised basis.

    I therefore do of course expect the rules to favour me as I am but an accident, they don't :cry: . I am a LL, not a number (or an accident) :rotfl:
    .
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