Additional taxes on second properties / holiday Lets

Mick70

wonder how long it is before both the govt and local councils realise they could make decent return by increasing taxes on additional properties, seems to be ever increasing buying more properties to rent out as a holiday let and then minimising taxes via all the loopholes currently on offer 

Grumpy_chap

Mick70 said:

wonder how long it is before both the govt and local councils realise they could make decent return by increasing taxes on additional properties, seems to be ever increasing buying more properties to rent out as a holiday let and then minimising taxes via all the loopholes currently on offer 

What type of additional tax do you have in mind?
Second homes / holiday lets already attract:
 - higher stamp duty on acquisition
 - CGT on disposal
 - Council Tax (sometimes higher than the standard rate for PPR).

Dazed_and_C0nfused

And the ability to claim finance costs such as mortgage interest has been stopped.

In certain situations you can claim a tax deduction instead but this is limited to getting relief at basic rate and does not prevent you from having a larger taxable profit figure.

As a result things like HICBC, tapered Personal Allowance, loss of Marriage Allowance and reduction in Married Couple's Allowance can all lead to larger tax bills

Jeremy535897

Dazed_and_C0nfused said:

And the ability to claim finance costs such as mortgage interest has been stopped.

In certain situations you can claim a tax deduction instead but this is limited to getting relief at basic rate and does not prevent you from having a larger taxable profit figure.

As a result things like HICBC, tapered Personal Allowance, loss of Marriage Allowance and reduction in Married Couple's Allowance can all lead to larger tax bills

Also grant calculations for student children. Perversely the rules can leave you better off in certain circumstances, for example where in year one you are a non taxpayer, and the rental income net of all costs including finance would not produce a loss. If you become a taxpayer in year two, you can bring forward the unused tax credit from year one and use it, whereas under the old rules it would have just reduced the non-taxable rental surplus in year one.

Mick70

There are loopholes to get round council tax rates as well as many other means to minimise tax on holiday lets / 2nd homes , all of which could easily be closed .
they are also stopping local people getting on the property ladder in many areas 

Grumpy_chap

Mick70 said:

There are loopholes to get round council tax rates as well as many other means to minimise tax on holiday lets / 2nd homes , all of which could easily be closed .
they are also stopping local people getting on the property ladder in many areas 

I'm not sure which loopholes you refer to, but loopholes should be closed.  That probably requires a far simpler tax system overall and not something that I imagine we will ever get from any Government.

In many areas, the local economy depends on tourism. 
If you drive out the holiday lets, less visitors and the local area suffers also. 
It is a two-sided coin as the property is cheaper but the locals have no job so cannot afford a house.  
So, you have to take the land-area occupied by the holiday lets to create alternative work space and attract new businesses.
Because the holiday lets have been knocked down to allow the industrial park to be built, still no more houses for locals.
OK - OK - So, that is a grave over-simplification but is sort of shows that the link is not as simple.

If there are no holiday let owners, there are no holiday lets so no holidays for families.
Unless you only object to the individual with the single holiday let but are happy to accept big business with multiple holiday lets, holiday camps, hotels...

Pennywise

Dazed_and_C0nfused said:

And the ability to claim finance costs such as mortgage interest has been stopped.

Interest is still fully allowable for qualifying holiday lettings (i.e. number of days available/let criteria met).

Pennywise

I think another aspect is that holiday lettings owners did VERY well generally from the covid relief schemes.  I have a number of clients who got an average of £28k per "letting unit", despite some of them being open for business (and very busy) for most of the covid period.  

Most local councils allowed for "late" registrations for business rates (which they'd not previously been registered for) and immediately qualified for the initial £10k covid payments, and then subsequently from the local councils additional restrictions grants.  All that despite most of them continuing to be operational, housing "essential" workers during the strict lockdowns and then normal temporary lettings during the more relaxed restrictions for holidays etc.

The ones who did the best were those with converted outbuildings, such as barn conversions, where there were several separate "units" who were least affected by the lockdowns.  They could operate because they had separate entrances rather than communal entrances/hallways so could be operational when others had to remain closed.  Common sense would have dictated that generous covid relief grants were restricted to holiday letting businesses that were worst affected, i.e. those without separate entrances that couldn't legally operate!

It is very strange that when holiday lettings are generally regarded as detrimental, that local councils were falling over themselves to throw money at them, when they didn't actually "need" it, by contrast to the govt deliberately excluding 3 million self employed (by use of anomolous and unfair exclusions) to people who did need help!

There's something wrong when "unworthy" businesses got lots of help when others got nothing.

p00hsticks

Grumpy_chap said:

Mick70 said:

There are loopholes to get round council tax rates as well as many other means to minimise tax on holiday lets / 2nd homes , all of which could easily be closed .
they are also stopping local people getting on the property ladder in many areas 

I'm not sure which loopholes you refer to, but loopholes should be closed.  That probably requires a far simpler tax system overall and not something that I imagine we will ever get from any Government.

In many areas, the local economy depends on tourism. 
If you drive out the holiday lets, less visitors and the local area suffers also. 
It is a two-sided coin as the property is cheaper but the locals have no job so cannot afford a house.  
So, you have to take the land-area occupied by the holiday lets to create alternative work space and attract new businesses.
Because the holiday lets have been knocked down to allow the industrial park to be built, still no more houses for locals.
OK - OK - So, that is a grave over-simplification but is sort of shows that the link is not as simple.

If there are no holiday let owners, there are no holiday lets so no holidays for families.
Unless you only object to the individual with the single holiday let but are happy to accept big business with multiple holiday lets, holiday camps, hotels...

I live in an area with many holiday lets and second homes and there is a definite feeling where I am that, while a certain amount of holiday lets are desirable, ther is a tipping point. While the tourist industry does generate many jobs, they are mainly minimum wage and seasonal.  The homes on either side of us are empty for much of the year, and the local community, while vibrant, is in desperate need of the local infrastructure such as dentists, medical facilities, schools etc that it would get if these houses were occupied by full time residents. As Pennywise points out, we saw the owners of these properties (who are not local) get given large hand-outs during Covid, whilst not contributing at all via council tax to the local area....    

https://www.northyorks.gov.uk/news/article/second-home-owners-face-council-tax-premium

RogerPensionGuy

Hi Anyone. 

Hopefully my question is simple.

I am contemplating buying a flat off an owner who wants a quick sale and is prepared to accept an offer below the apparent valuation and I feel buying it may be profitable over a 3 or 5 years maybe hopefully.

Quick sale price is 600K and due 2nd property SDLT is 35.5K and lets guess my buying and selling fees now/3 or 5 years is 10K, so the costs are say 645.5 in total.

My question at long last, if I sell flat for say 700K in 5 years, is my CGT 54.5K and I will pay the current CGT rate at that time, I think its 24% of 54.5K.

Or is the above wrong?

Cheers Roger.

eskbanker

RogerPensionGuy said:

Quick sale price is 600K and due 2nd property SDLT is 35.5K and lets guess my buying and selling fees now/3 or 5 years is 10K, so the costs are say 645.5 in total.

My question at long last, if I sell flat for say 700K in 5 years, is my CGT 54.5K and I will pay the current CGT rate at that time, I think its 24% of 54.5K.

Or is the above wrong?

Your chargeable gain would be £54.5K less costs associated with the sale, and your actual CGT liability would be determined according to your income tax band at the time (so some or all could be at the lower 18% rate) and also your annual allowance, currently £3K (from 2024/25).