Small and New landlords

calcotti

The zero equity argument only exists if the property is unsaleable for some reason. Arguably that was the case during full lockdown. That was an exceptional situation. It is not an argument that would normally apply. As I have said already there is however a 6 month disregard if the property is put on the market.

Jeremy535897

Grumpy_chap said:

Jeremy535897 said:

OK, so I understand (but don't agree with) the argument that BTL property has zero equity.

As I said, that argument will not always be available (possibly where the BTL mortgage is higher than 75% would be an example).
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Thanks Jeremy,
Am I reading that bit back-to-front?
High mortgage means lower equity and makes the "zero equity" argument stronger?

I think if you were my Accountant I could avoid all tax and claim UC.  Same for my wife.  We'll be rolling in it!

Yes. Remember the value of capital for UC takes debt into account, so if your mortgage was 100%, ie equal to the value of the property, there would be no capital to count. From ADM H1:
"H1615 An encumbrance is secured on capital when a person is owed money and has a right
1. to the capital or
2. to stop it being sold
 until the money owed is paid back. Such a debt is a legal charge or mortgage and is deducted from the value of capital. A debt which is not secured is not deducted"

In cases where the equity (valued on a traditional basis) is say only 10%, the argument that you can't evict a tenant for 6 months might persuade a DM to accept that there's enough doubt that you might see nothing at all from a sale.

UC is harder to circumvent than the Labour version of tax credits, with its high income increase disregard. In those days, you could buy a work van for say £25,000, and if the accounts results worked, the saving of tax, NIC and increase in tax credits could actually amount to £26,500. Labour never learn. Back in the seventies, people actually wanted losses from being a Name at Lloyds, because the losses could be set against income subject to tax at 98%, and the tax free repayment supplement on the tax repaid was well over 2%. O happy days...

calcotti

Jeremy535897 said: Yes. Remember the value of capital for UC takes debt into account, 

For the avoidance of doubt - only in the case of property. Debt in general cannot be offset against capital in general.