BTL profit/loss calculator

[caymanbill]

Hi all,
I'm aware of the upcoming rule changes on tax but just wanted to get a solid handle on potential profit and loss as things stand at the moment for a potential BTL purchase.

Found this calculator here on the telegraph site:
http://www.telegraph.co.uk/property/buy/buy-to-let...

The above assumes an interest only mortgage, and ideally i'd want a repayment mortgage. Also it mentions "tax deductibles" i.e service charge and agent fees etc. However not sure if the calculation just deducts these costs from the taxable amount, and then we have to deduct the actual costs from the "profit" separately?

I'm not really an accountant and don't partially trust my workings, so before I visit an accountant to scrutinise this , I was interested in seeing if there are any calculators/spreadsheets which are available for BTL investors?

[Eric Mc]

Income and expenditure accounts for buy to lets are fairly simple.

Effectively, the "Income" is the Gross Rental income from the tenant BEFORE any deductions for agent's fees etc.

The "Expenditure" is the total of allowable costs that can be deducted from the Gross Rental income to arrive at a taxable profit.
These would include -

Agent's Fees
Interest and finance costs
Legal fees regarding dealing with tenants (but NOT regarding setting up leases)
General repairs and renewals
Expenses incurred in respect of safety certificates
Insurance
Council tax and water charges (if met by landlord)
Light and heat costs (if met by landlord)
Accounting fees regarding preparation of the rental accounts
Advertising

A simple Excel spreadsheet will allow you to cover the arithmetic of the calculation quite easily.

HOWEVER - there are a number of significant complications coming in over the next year or so.

From 6 April 2017, the full extent of loan interest and finance costs will not be eligible for full tax relief on the rental profits. This will make the above summary a lot more complicated

For tax year 2019/20, HMRC are introducing Making Tax Digital. This will make landlords submit online to HMRC EVERY THREE MONTHS their rental accounts - calculated correctly, with no errors etc

AND

they will HAVE to use HMRC compatible software which does not exist yet. Simple spreadsheets will NOT be allowed.

[BoRED S2upid]

Are HMRC going to tell every landlord in the country that? Provide the software, training etc... or expect us to all use accountants?

We're going to need a lot more accountants! There are millions of landlords with 1 property who do their own yearly returns.

[Eric Mc]

BoRED S2upid said:

Are HMRC going to tell every landlord in the country that? Provide the software, training etc... or expect us to all use accountants?

We're going to need a lot more accountants! There are millions of landlords with 1 property who do their own yearly returns.

HMRC have already told you all. Did you not hear?

And they fully expect landlords (and sole trader business and partnerships) to be able to cope with this WITHOUT the need of an accountant.

Most accountants won't be able to cope with the workload this imposes anyway.

[BoRED S2upid]

Eric Mc said:

BoRED S2upid said:

Are HMRC going to tell every landlord in the country that? Provide the software, training etc... or expect us to all use accountants?

We're going to need a lot more accountants! There are millions of landlords with 1 property who do their own yearly returns.

HMRC have already told you all. Did you not hear?

And they fully expect landlords (and sole trader business and partnerships) to be able to cope with this WITHOUT the need of an accountant.

Most accountants won't be able to cope with the workload this imposes anyway.

If by telling me they are relying on you to spread the word then thanks I'm now fully informed and it's a joke!

I'm going to check with a few sole traders I know who don't have accountants to see if they have been told.

[Eric Mc]

HMRC are really only talking to the professional adviser world at the moment - which is pretty shocking as these changes are going to affect around 30 million taxpayers - in less than two years.

It is going to be the biggest disaster ever to befall the UK tax system - in my view.

[MrChips]

I've built myself a spreadsheet to show the effect of the changes on tax relief on mortgage interest. Send me a pm and I'm happy to ping it over. Whilst I've had an accountant give it a once over, i am however not a qualified accountant myself so this is only my own little calculator but might get you started.

[Eric Mc]

I pay an expensive software company for all that. I expect that the tax calculations for 2017/18 will incorporate the different techniques necessary to claim interest relief correctly.

[98elise]

Also worth remembering that if Comrade Corbyn gets into power (stop laughing at the back) then he's going to make BTL landlords sell their properties to tenants for at least 70k discount.

[caymanbill]

cheers for the advice chaps.

i'll take you up on that offer Chips, very kind of you. PM sent!

[TheLordJohn]

98elise said:

Also worth remembering that if Comrade Corbyn gets into power (stop laughing at the back) then he's going to make BTL landlords sell their properties to tenants for at least 70k discount.

With any luck someone will do us all a favour before then...

[tighnamara]

Eric Mc said:

HMRC are really only talking to the professional adviser world at the moment - which is pretty shocking as these changes are going to affect around 30 million taxpayers - in less than two years.

It is going to be the biggest disaster ever to befall the UK tax system - in my view.

Silly question but why will 30 million tax payers be affected by a change to BTL tax system ?

[Eric Mc]

The change is called Making Tax Digital - which affects EVERY taxpayer - not just buy to let landlords.

Some will be affected more than others, of course. The self employed, partners in partnerships and buy to let landlords will find the changes the most difficult to take on board.

There are over .30 million taxpayers in the UK. Of these 10 million complete Self Assessment tax returns. That 10 million will have the toughest job adjusting bit all 30 plus million will need to be aware of the implications.

[tighnamara]

Eric Mc said:

The change is called Making Tax Digital - which affects EVERY taxpayer - not just buy to let landlords.

Some will be affected more than others, of course. The self employed, partners in partnerships and buy to let landlords will find the changes the most difficult to take on board.

There are over .30 million taxpayers in the UK. Of these 10 million complete Self Assessment tax returns. That 10 million will have the toughest job adjusting bit all 30 plus million will need to be aware of the implications.

Thanks, that's clear now.

[Welshbeef]

Eric Mc said:

BoRED S2upid said:

Are HMRC going to tell every landlord in the country that? Provide the software, training etc... or expect us to all use accountants?

We're going to need a lot more accountants! There are millions of landlords with 1 property who do their own yearly returns.

HMRC have already told you all. Did you not hear?

And they fully expect landlords (and sole trader business and partnerships) to be able to cope with this WITHOUT the need of an accountant.

Most accountants won't be able to cope with the workload this imposes anyway.

The thing with taxes especially unpopular ineffective ones (like Poll tax) can and are changed.
If it's unworkable govt will kick the can down the road - it's all about doing the right thing and more red tape (for what real upside/slightly more accurate tax code who cares it's pocket change).