BTL to be reviewed

Gorgeous_George

Good news? (clicky)

The government has launched a review of the private rental sector in England, which it hopes will improve conditions for landlords and tenants.

I welcome anything that helps to improve relationships between LLs and tenants.

GG

Leighthal

As a potential BTL'er (can't sell my old terraced house so thinking of remortgageing and letting it out) I would be interested in the findings.

brit1234

Part of the review is looking at closing the tax loop holes. From what I have heard the government want to remove the tax advantages so it is a even playing field with first time buyers.:j

Gorgeous_George

brit1234 wrote: »

Part of the review is looking at closing the tax loop holes. From what I have heard the government want to remove the tax advantages so it is a even playing field with first time buyers.:j

I would be interested in knowing more about these 'loopholes'. Care to expand or provide references because I'd hate to pay too much tax - or not declare the correct loss?

GG

subjecttocontract

I believe the poster is eluding to the situation where BTL investors can offset their mortgage interest against tax and FTB'ers can't.

If it happens it might cause some serious problems as large numbers of BTL investors sell up thereby significantly reducing the private rented housing stock. Less rented accomodation available.....just when there is massive shortage of rented property.

Mrs_pbradley936

brit1234 wrote: »

Part of the review is looking at closing the tax loop holes. From what I have heard the government want to remove the tax advantages so it is a even playing field with first time buyers.:j

There are no tax advantages, any tax saved from income is more that made up for by Capital Gains. Unless of course you want that introduced for everone not just landlords? That would be fair.

brit1234

Gorgeous_George wrote: »

I would be interested in knowing more about these 'loopholes'. Care to expand or provide references because I'd hate to pay too much tax - or not declare the correct loss?

GG

First time buyers have in the last decade been in competition for the same type of property as buy to let investors IE the 1-2 bedroom flat & terraced homes. In this time the buy to let market has come from behind to over take first time buyers in this area. A significant reason for this is the tax relief the landlords get which has been removed from normal residential owners many years ago. Now the government realise this growing crises from my sources. To adjust this imbalance they are unlikely to return the tax benefits to potential home owners due to financial constraints. So that leaves removing the tax benefits from by to let investors which will also provide the treasury with an added revenue source. This will be seen as attractive to them as traditional other sources of revenue dwindle during this down turn.

however they will have to constrain this somehow not to kill the buy to let sector off completely. As this would kill the revenue completely and make them unpopular with certain members of the community.

What is certain is that the status quo can't remain and will move towards reducing these inequalities. Looking at it rationally I think it will need to some change in Capital gains to compensate the investor and taxable rents.

I would suggest the simplest way to do this and promote a sustainable buy to let sector would be to end buy to let interest only mortgages in favour of repayment ones which they can be taxed.

At the moment landlords are using equity on interest only properties to buy further properties repeating the cycle again and again. This creates large profits on paper for the owner when in reality own nothing unless they sell passing all the risk to the bank. In effect creating a massive pyramid scheme putting our economy at extreme risk like at present.

A buy to let payment model would reduce this risk and promote a healthy landlord sector and at the same time slow the BTL market to a fairer slice of the pie. Allowing for first time buyers more choice as investors would have to be more rational with their purchases. I think due to the credit crunch the banks would welcome this as investors take a greater share of the risk if things go wrong.

In the current climate investors can just simply go bankrupt which isn't good for the banks in a falling price market as they will make huge loses like in the US at the moment.

It will be interesting to see what this review finally comes up with?

Any comments?

brit1234

Mrs_pbradley936 wrote: »

There are no tax advantages, any tax saved from income is more that made up for by Capital Gains. Unless of course you want that introduced for everone not just landlords? That would be fair.

I suggest tax on rent and to compensate reduced capital gains tax (specifically for landlords) or none at all.

I believe at the moment many investors due to the fragility of the buy to let sector will be forced to sell or go bankrupt.

My way gives a level playing field for all and produce a more sustainable market even during price falls. I think the last thing a investor wants is to sell in a falling market and then pay any profits from a portfolio in capital gains.

Debt_Free_Chick

brit1234 wrote: »

I suggest tax on rent

But the rent is already subject to income tax, isn't it [/quote]

IveSeenTheLight

Debt_Free_Chick wrote: »

But the rent is already subject to income tax, isn't it

Tax is only subjected to the rent is a profit is made after all deductions.
Deductions include the interest on the mortgage, maintenance, any advertising costs, insurance, factoring fee's etc etc etc.

You can make a loss and it will roll over for 5 years to compensate against any years of profit.

Debt_Free_Chick

Tax is only subjected to the rent is a profit is made after all deductions.
Deductions include the interest on the mortgage, maintenance, any advertising costs, insurance, factoring fee's etc etc etc.

You can make a loss and it will roll over for 5 years to compensate against any years of profit.

Agreed ...... but making rent taxable isn't going to change anything, is it? Perhaps what Brit1234 meant was to change the rules over allowable deductions e.g. exclude the interest from allowable deductions.

And would this apply to those who are running a bona-fide investment business? Professional, full-time LLs?

It's going to be very interesting to see how "BTL" is defined.

Also a little worrying to find a Government dabbling in the mechanics of a "free market".