BTL Tax rules post 2020 - am i on the right track?
Discussion
Principally it's ridiculous to charge income tax for more than the actual income. And it's not that 40% is was low tax rate.
Meanwhile the corporate world not only gets taxed on the actual income (as it should) but also at a lot lower rate.
It does look more like people vs business and you know on which side the rheTories are.
Meanwhile the corporate world not only gets taxed on the actual income (as it should) but also at a lot lower rate.
It does look more like people vs business and you know on which side the rheTories are.
One things for sure with all this, is it's the tenants that will be hit the hardest.
Heavily leveraged landlords will be forced to sell up, which will leave the tenant to either buy the property or move.
Due to the above there will be less rental stock available so rents will rise.
The argument that landlords who own their BTL's outright won't raise rents is laughable, if they can they will, it's a business.
I'm from the northeast and all of my tenants rent as they simply cannot afford to buy, either due to poor credit history, poor employment situation or simply cannot save up a 10% deposit of around 9k so they'll suffer. If house prices drop by 20% they still won't be able to buy.
Just my thoughts
Heavily leveraged landlords will be forced to sell up, which will leave the tenant to either buy the property or move.
Due to the above there will be less rental stock available so rents will rise.
The argument that landlords who own their BTL's outright won't raise rents is laughable, if they can they will, it's a business.
I'm from the northeast and all of my tenants rent as they simply cannot afford to buy, either due to poor credit history, poor employment situation or simply cannot save up a 10% deposit of around 9k so they'll suffer. If house prices drop by 20% they still won't be able to buy.
Just my thoughts
Unless the houses are physically destroyed there will be no impact on supply.
If s house is sold, it either goes to another landlord or an owner occupier.
If sold to an owner occupier, rental demand reduces by 1 so no net effect.
The market sets the rent, it has nothing to do with landlords costs (they will be charging the max they can unless they are attributing value to less voids and so are charging below market).
If s house is sold, it either goes to another landlord or an owner occupier.
If sold to an owner occupier, rental demand reduces by 1 so no net effect.
The market sets the rent, it has nothing to do with landlords costs (they will be charging the max they can unless they are attributing value to less voids and so are charging below market).
jdw1234 said:
Unless the houses are physically destroyed there will be no impact on supply.
If s house is sold, it either goes to another landlord or an owner occupier.
).
That's a really good point, hadn't looked at it that way.If s house is sold, it either goes to another landlord or an owner occupier.
).
It will be interesting for sure and has just gave me a kick up the arse to get mine paid off as soon as possible, so no big deal.
It does seem like the government are trying to appear to be solving a south east problem but legislating the UK to address it
jdw1234 said:
Unless the houses are physically destroyed there will be no impact on supply.
If s house is sold, it either goes to another landlord or an owner occupier.
If sold to an owner occupier, rental demand reduces by 1 so no net effect.
The market sets the rent, it has nothing to do with landlords costs (they will be charging the max they can unless they are attributing value to less voids and so are charging below market).
This is a point I've made a few times as well. BTL is just the way the house is owned, it does not affect supply and demand. Its still 1 family in 1 home. If we forced every BTL landlord to give their house away to their tenant, how many more house would be added to the supply. The answer is of course none as they are still occupied. Which ever way you shuffle the figures its the same outcome.If s house is sold, it either goes to another landlord or an owner occupier.
If sold to an owner occupier, rental demand reduces by 1 so no net effect.
The market sets the rent, it has nothing to do with landlords costs (they will be charging the max they can unless they are attributing value to less voids and so are charging below market).
Any additional taxes in the market will eventually end up with the Tenants paying.
I respectfully disagree with your last paragraph. Current landlords will have to swallow the pain (either through reduced profit or selling at a price that makes the numbers work for a new landlord or an owner occupier can afford).
Rents are dictated by the market not landlords costs.
Rents are dictated by the market not landlords costs.
jdw1234 said:
Rents are dictated by the market not landlords costs.
All manor of people may buy these ex BTL houses very possibly not the current tenant.
The point of 1 house is 1 house regardless of ownership is spot on but as every year passes the demand increases with the shortfall of new houses and some people simply prefer to rent.
As we've also seen all over the news this summer, there's a huge migrant crisis heading our way, this can only place more pressure on the lack of houses.
Sorry, I don't quite follow you.
If 20% of housing stock is sold as a result of the tax changes they will either be sold to:
1) other landlords at a price that reflects the new tax regime.
2) owner occupiers at a price that reflects current affordability (I.e. MMR and deposit requirements).
The best tenants are going to be the likely buyers. This is likely to have a downward impact on rents as the remaining pool are the ones who don't have the salaries to afford to buy.
I'm not sure the wave of immigrants coming in are going to have the wages to support current/increased rents.
If you run the numbers in excel, you are looking at huge hikes in rent to cover the tax impact. The market won't absorb it.
If 20% of housing stock is sold as a result of the tax changes they will either be sold to:
1) other landlords at a price that reflects the new tax regime.
2) owner occupiers at a price that reflects current affordability (I.e. MMR and deposit requirements).
The best tenants are going to be the likely buyers. This is likely to have a downward impact on rents as the remaining pool are the ones who don't have the salaries to afford to buy.
I'm not sure the wave of immigrants coming in are going to have the wages to support current/increased rents.
If you run the numbers in excel, you are looking at huge hikes in rent to cover the tax impact. The market won't absorb it.
jdw1234 said:
I respectfully disagree with your last paragraph. Current landlords will have to swallow the pain (either through reduced profit or selling at a price that makes the numbers work for a new landlord or an owner occupier can afford).
Rents are dictated by the market not landlords costs.
Additional costs will affect the market. Some landlords will swallow it, some will sell up. This will lower supply hence prices will rise until its worth landlords investing, and that will be when the rents achieved make it worthwhile.Rents are dictated by the market not landlords costs.
The cost of any goods or services are fundamentally linked to the suppliers costs
Edited by 98elise on Saturday 24th October 12:10
98elise said:
I don't really consider capital gains as I don't intend to sell
Then it's time you did consider those gains.98elise said:
In total my 120k (ish) investment in 5 years has grown by around 300k.
Which neatly demonstrates that landlords have absolutely nothing to complain about. A reduction in net rental yield will easily be absorbed within the overall financial model. Ozzie Osmond said:
98elise said:
I don't really consider capital gains as I don't intend to sell
Then it's time you did consider those gains.98elise said:
In total my 120k (ish) investment in 5 years has grown by around 300k.
Which neatly demonstrates that landlords have absolutely nothing to complain about. A reduction in net rental yield will easily be absorbed within the overall financial model. 98elise said:
jdw1234 said:
I respectfully disagree with your last paragraph. Current landlords will have to swallow the pain (either through reduced profit or selling at a price that makes the numbers work for a new landlord or an owner occupier can afford).
Rents are dictated by the market not landlords costs.
Additional costs will affect the market. Some landlords will swallow it, some will sell up. This will lower supply hence prices will rise until its worth landlords investing, and that will be when the rents achieved make it worthwhile.Rents are dictated by the market not landlords costs.
The cost of any goods or services are fundamentally linked to the suppliers costs
Edited by 98elise on Saturday 24th October 12:10
It will be worth other landlords investing when house prices have fallen to a point where yields are attractive enough.
98elise said:
In total my 120k (ish) investment in 5 years has grown by around 300k.
...
Also just to correct you about leveraged investments. Any one can spread bet or do CFD's on the stock market of they want to get into leveraged investments.
with respect, which bit of "speculative punt" don't you understand?...
Also just to correct you about leveraged investments. Any one can spread bet or do CFD's on the stock market of they want to get into leveraged investments.
And read your final paragraph. CFDs are indeed bets. They are not investment. No one in their right mind would put on a huge position in a single asset CFD and call it preparation for their retirement. If a significant number of people started doing that the regulators would step in and stop it.
ATG said:
98elise said:
In total my 120k (ish) investment in 5 years has grown by around 300k.
...
Also just to correct you about leveraged investments. Any one can spread bet or do CFD's on the stock market of they want to get into leveraged investments.
with respect, which bit of "speculative punt" don't you understand?...
Also just to correct you about leveraged investments. Any one can spread bet or do CFD's on the stock market of they want to get into leveraged investments.
And read your final paragraph. CFDs are indeed bets. They are not investment. No one in their right mind would put on a huge position in a single asset CFD and call it preparation for their retirement. If a significant number of people started doing that the regulators would step in and stop it.
The risk of losing was pretty low, and leveraging was a way to capitalise on that.
98elise said:
I don't think it was a speculative investment (not for me anyway). I get a healthy return on my cash invested regardless of what the property market is doing. I did my research, and invested when I thought the time was right and the properties represented good value (South East, 1 hour from London, not more than 130k each).
The risk of losing was pretty low, and leveraging was a way to capitalise on that.
the same neck of woods that we are in and have put into property. Lewes/Burgess Hill Secure area for lettings. Also run a letting agency business and demand is strong.The risk of losing was pretty low, and leveraging was a way to capitalise on that.
Mr Noble said:
Sorry to say that it's exactly you whom the chancellor is targeting. Those who are using BTL mainly to gain as much 40% tax offset as possible.
I checked the figures and it indeed would have made my BTL operate at a massive loss. I'm not doing this for charity, so I sold the place last week. Whoop!Thanks to this thread for the notice!
Paul O said:
Mr Noble said:
Sorry to say that it's exactly you whom the chancellor is targeting. Those who are using BTL mainly to gain as much 40% tax offset as possible.
I checked the figures and it indeed would have made my BTL operate at a massive loss. I'm not doing this for charity, so I sold the place last week. Whoop!Thanks to this thread for the notice!
The first one has just been reviewed and its gone up by £55 (£695 to £750). I can probably push that to £775/800 next year as £750 is still just below market. As long as I cover the additional taxes then I'm happy.
I did notice that there seems to be even fewer rental properties in my area of late, but I've no idea if that's due to some landlords pulling out of the market early.
I think there will be a rush to the door for a certain sector. Anyone highly leveraged (probably ~>75%) with properties generating over ~£50k income is in increasingly deep trouble with this leading up to 2020. I think I'm right in saying large portfolio landlords tend to focus on lower income tenants.
They will sell up when they realise and I don't think nearly enough have realised. Enough of that housing stock hitting the market all at once may well be big enough to trigger a much wider correction.
They will sell up when they realise and I don't think nearly enough have realised. Enough of that housing stock hitting the market all at once may well be big enough to trigger a much wider correction.
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