Death of buy-to-let: landlords wake up to Osborne's 150pc ta

[PurpleMoonlight]

Rowley Birkin said:

We do, on our sole trader property business.

How does 'we' and 'sole trader' work?

Is the NI you pay compulsory or voluntary?

[PurpleMoonlight]

Rowley Birkin said:

The link that JP JP JP posted above is interesting for two reasons. Firstly it emphasises why people like you need good advice - you may gain nothing by incorporating. Also because it highlights why this new regime is unfair to large sole trader landlords who are genuinely running a business. They can be doing exactly the same as another landlord who is incorporated and yet be treated completely differently for tax purposes.

There has always been differences between the taxation of self employed and incorporated businesses.

[Rowley Birkin]

PurpleMoonlight said:

Rowley Birkin said:

We do, on our sole trader property business.

How does 'we' and 'sole trader' work?

Is the NI you pay compulsory or voluntary?

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Edited by Rowley Birkin on Tuesday 25th August 07:30

[Rowley Birkin]

PurpleMoonlight said:

Rowley Birkin said:

The link that JP JP JP posted above is interesting for two reasons. Firstly it emphasises why people like you need good advice - you may gain nothing by incorporating. Also because it highlights why this new regime is unfair to large sole trader landlords who are genuinely running a business. They can be doing exactly the same as another landlord who is incorporated and yet be treated completely differently for tax purposes.

There has always been differences between the taxation of self employed and incorporated businesses.

Not in the sense that we are discussing here.

[TooMany2cvs]

Rowley Birkin said:

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Indeed. The sole trader is personally employing the staff.

[PurpleMoonlight]

Rowley Birkin said:

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Edited by Rowley Birkin on Tuesday 25th August 07:30

Yes I know, but a sole trader can't be a 'we' only a 'I'.

Is the NI you refer to then that of your employees rather than yourself personally?

[Rowley Birkin]

PurpleMoonlight said:

Rowley Birkin said:

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Edited by Rowley Birkin on Tuesday 25th August 07:30

Yes I know, but a sole trader can't be a 'we' only a 'I'.

Is the NI you refer to then that of your employees rather than yourself personally?

You are being pedantic. A sole trader business can correctly be referred to as we, despite ultimate liability being with an individual.

Anything you want to add to the topic in question, or do you just want to argue about semantics?

[RobinOakapple]

Rowley Birkin said:

PurpleMoonlight said:

Rowley Birkin said:

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Edited by Rowley Birkin on Tuesday 25th August 07:30

Yes I know, but a sole trader can't be a 'we' only a 'I'.

Is the NI you refer to then that of your employees rather than yourself personally?

You are being pedantic. A sole trader business can correctly be referred to as we, despite ultimate liability being with an individual.

Anything you want to add to the topic in question, or do you just want to argue about semantics?

You are answering a question with a question.

[PurpleMoonlight]

Rowley Birkin said:

You are being pedantic. A sole trader business can correctly be referred to as we, despite ultimate liability being with an individual.

Anything you want to add to the topic in question, or do you just want to argue about semantics?

You claimed that you paid NI on you rental income. I am enquiring how but you refuse to answer.

[Rowley Birkin]

PurpleMoonlight said:

Rowley Birkin said:

You are being pedantic. A sole trader business can correctly be referred to as we, despite ultimate liability being with an individual.

Anything you want to add to the topic in question, or do you just want to argue about semantics?

You claimed that you paid NI on you rental income. I am enquiring how but you refuse to answer.

Not refused at all. I am just not going to be drawn into a daft argument with you. We / I on the sole trader business pay 2 sorts of NI. iirc its class 4 for me, 1a for employees.

[rotarymazda]

I've rented before and dealt with the accounts of BTL owners. It's simply a speculative investment, not a business. I don't see why the taxpayer should be subsidising someone's speculative investments. Leaving the tax benefit at 20% seems too generous.

The old cry of "I might have to fix a boiler every 10 years" does not make it a business.

For the large players that want to treat it as a business, it can be done as a company, with the extra reporting requirements and higher borrowing costs that entails.

[Pheo]

rotarymazda said:

I've rented before and dealt with the accounts of BTL owners. It's simply a speculative investment, not a business. I don't see why the taxpayer should be subsidising someone's speculative investments. Leaving the tax benefit at 20% seems too generous.

The old cry of "I might have to fix a boiler every 10 years" does not make it a business.

For the large players that want to treat it as a business, it can be done as a company, with the extra reporting requirements and higher borrowing costs that entails.

Great point - pretty sure I can't offset my investment losses against my PAYE tax bill - so why do part time landlords get to do so with Mortgage interest. Surely the same argument can be made as per earlier on interest.

Unless I can offset losses, in which case, can someone tell me how to do it?

[Muffster]

Rowley Birkin said:

Commercial finance is a double-edged sword. It's more flexible, but you have far less protection and banks are people from whom it's best to have as much protection as possible!

Will Osborne change his mind? Not willingly and not entirely, if at all. But I can see him making some exceptions if the right pressure is brought to bear.

The link that JP JP JP posted above is interesting for two reasons. Firstly it emphasises why people like you need good advice - you may gain nothing by incorporating. Also because it highlights why this new regime is unfair to large sole trader landlords who are genuinely running a business. They can be doing exactly the same as another landlord who is incorporated and yet be treated completely differently for tax purposes.

Thanks for the info and taking the time to post.
One last question, do commercial mortgages attract higher percentage rates and set up fees that a standard BLT product?

Cheers.

[Rowley Birkin]

Muffster said:

Rowley Birkin said:

Commercial finance is a double-edged sword. It's more flexible, but you have far less protection and banks are people from whom it's best to have as much protection as possible!

Will Osborne change his mind? Not willingly and not entirely, if at all. But I can see him making some exceptions if the right pressure is brought to bear.

The link that JP JP JP posted above is interesting for two reasons. Firstly it emphasises why people like you need good advice - you may gain nothing by incorporating. Also because it highlights why this new regime is unfair to large sole trader landlords who are genuinely running a business. They can be doing exactly the same as another landlord who is incorporated and yet be treated completely differently for tax purposes.

Thanks for the info and taking the time to post.
One last question, do commercial mortgages attract higher percentage rates and set up fees that a standard BLT product?

Cheers.

It depends on a number of factors. LTV, quality of the asset, appetite and whether its interest only or repayment. Interest only might cost you 4.5-5.75 over 3 months Libor or BOE base, repayment maybe 2.5-4. Though I am a bit out of touch with regard to bank appetite. Plus you have legals and valuation fees.

[Ozzie Osmond]

Rowley Birkin said:

Commercial finance is a double-edged sword. It's more flexible, but you have far less protection and banks are people from whom it's best to have as much protection as possible!

What is this "protection" you seek?

You borrow the money - it's the bank that's got the repayment risk.

[Rowley Birkin]

Ozzie Osmond said:

Rowley Birkin said:

Commercial finance is a double-edged sword. It's more flexible, but you have far less protection and banks are people from whom it's best to have as much protection as possible!

What is this "protection" you seek?

You borrow the money - it's the bank that's got the repayment risk.

I have worded that badly. Commercial finance from banks tends to be higher risk.

The bank has a repayment risk, but that risk is covered either by equity in the asset(s) or by personal guarantees if the loan is in a company. Some of the big commercial lenders pulled some horrible stunts during the financial crisis, when they wanted their money back - even when it wasn't due. Most of these tricks revolved around either destroying the borrower's equity or the borrower.

One Bank from Yorkshire, for example, decided to exit property and started leaning on borrowers to repay, even when facilities weren't due. Their favoured technique was to force revaluations and to put in place a valuer who they knew would lowball. Then demand a margin call which they knew the borrower couldn't meet and recall the loan due to breach of the LTV covenant.

One un coop erative bank, when it found itself in trouble did much the same. Except they just made it clear that they were going to demand annual valuations.

To the best of my knowledge, none of the BTL lenders did this stuff.

Edited by Rowley Birkin on Tuesday 25th August 22:20

[Condi]

rotarymazda said:

I've rented before and dealt with the accounts of BTL owners. It's simply a speculative investment, not a business. I don't see why the taxpayer should be subsidising someone's speculative investments. Leaving the tax benefit at 20% seems too generous.

Quite right. For most people the return on capital is negligible and is only there to cover costs until they come to liquidate the asset, relying on the value of the property increasing. I know that my friends own a £200k BTL, probably with about 75% mortgaged. Their profit after bills is £50/m - 1.2%. The only thing which makes it worthwhile is leveraged increased in property value which is probably about 6%. No 'business' would consider that a beneficial use of money.

Which is what frustrates me - if middle age people want someone to stash some cash for their pensions there are plenty of other investments which dont have the negative consequences on the market that the BTL boom has done. Why not buy a 60's mustang instead? % capital increase will probably be the same, if not more, and you can enjoy it at the same time!

[TheLordJohn]

PurpleMoonlight said:

Rowley Birkin said:

If a business isn't incorporated, even if there are a dozen people working there, it is a sole trader business by default (unless it's made a partnership, LLP etc.)

Edited by Rowley Birkin on Tuesday 25th August 07:30

Yes I know, but a sole trader can't be a 'we' only a 'I'.

Is the NI you refer to then that of your employees rather than yourself personally?

Congratulations, you've won this months award for 'Most retarded post on any internet forum'.
Despite being provided with a full, and correct, answer, you persist with your stupid question/comment.

All this complaining from none LL's just smacks of a child saying "It's not fair".
In this country, we just seem to want a race to the bottom.
Instead of saying "Why does he get something I don't?", why not ask "How can I get what he is?".

Edited by TheLordJohn on Tuesday 25th August 23:28

[mondeoman]

Pheo said:

Great point - pretty sure I can't offset my investment losses against my PAYE tax bill - so why do part time landlords get to do so with Mortgage interest. Surely the same argument can be made as per earlier on interest.

Unless I can offset losses, in which case, can someone tell me how to do it?

Landlords can't either. Interest / losses are offset against rental income only, not paye income. Two separate income streams, taxed independently (kind of).

[PurpleMoonlight]

Rowley Birkin said:

Not refused at all. I am just not going to be drawn into a daft argument with you. We / I on the sole trader business pay 2 sorts of NI. iirc its class 4 for me, 1a for employees.

If HMRC accept your BTL's are a 'business' so as to demand Class 4 NI from you, are you sure that you will not be able to class all you interest payment as an expense of the business?