Understanding new tax for btl and SDLT

Legacy_user

I own a house currently and if I buy houses that cost less than £125,000 does that mean I avoid the stamp duty?
If I did purchase houses that are more than £125,000 is it correct that "the portion that is greater than £125,000" therefore is liable to the "second user rate" which is whatever it is. 3% maybe?

I don't pay tax of any kind at the moment as I've no taxable income at the moment. If I buy houses and rent them out using a mortgage does that mean that now the "interest" that I pay on my mortgage every month is no longer deductable in terms of calculating the profit?

Is this something that changes only when you're a 40% tax payer?

This last bit is something I've not been able to understand easily.

Thank you for any help on this topic

AdrianC

You need to separate the SDLT on the purchase and the income tax on your lettings business.

SDLT will be £3,720 on a £124k purchase - 0% on the basic purchase, because it's <£125k, but +3% on the entire purchase, because it's an additional property.
https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/


Income tax will be payable on all your income, subject to the usual bands and rates. That includes the income from your letting business, after allowable expenses. Mortgage interest is still partially offsettable against basic rate tax only, but is tapering off over the next two tax years.
https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

System

Thank you AdrianC. After the 2 year period does that mean that no mortgage interest will be able to be offset at all for anybody?

AdrianC

The linked article is clear.

System

Deductions from property income will be restricted to:

75% for 2017 to 2018
50% for 2018 to 2019
25% for 2019 to 2020
0% for 2020 to 2021 and beyond

So it looks like after 21 there will be no deductions allowed.

AdrianC

Now read the other half of the sentences...

Landlords will be able to obtain relief as follows:

• in 2017 to 2018 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
• in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
• in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
• from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction

System

Thanks, that's the bit I need to go away and research/learn about.

AdrianC

paranoidandroid31978 wrote: »

This is ridiculous! How is a landlord supposed to earn a living.

It's almost like the government are deliberately trying to dissuade people from the BtL market...

foxy-stoat

paranoidandroid31978 wrote: »

I don't pay tax of any kind at the moment as I've no taxable income at the moment.

Very much doubt you will be able to get a mortgage.

Crashy_Time

AdrianC wrote: »

It's almost like the government are deliberately trying to dissuade people from the BtL market...

Yes, and at a time when there is such a serious shortage of housing. Shocking.

00ec25

paranoidandroid31978 wrote: »

I own a house currently and if I buy houses that cost less than £125,000 does that mean I avoid the stamp duty? No it does not
If I did purchase houses that are more than £125,000 is it correct that "the portion that is greater than £125,000" therefore is liable to the "second user rate" which is whatever it is. 3% maybe? read the rules, it really is simple to understand


I don't pay tax of any kind at the moment as I've no taxable income at the moment. If I buy houses and rent them out using a mortgage does that mean that now the "interest" that I pay on my mortgage every month is no longer deductable in terms of calculating the profit? using what income to pay the mortgage?

Is this something that changes only when you're a 40% tax payer?
no, read the guide

This last bit is something I've not been able to understand easily. ask a parent to explain?

Thank you for any help on this topic

read the links already given