150% tax for BTL investors?!?!?!?

150% tax for BTL investors?!?!?!?

Author
Discussion

RobinOakapple

2,802 posts

113 months

Tuesday 25th August 2015
quotequote all
budfox said:
No, I'm saying it's morally wrong to own more than one property. I grant you that the super-rich will always have multiple homes and such things will never change, but for Joe "born at the right time" Average to use his fortunate position to make a tidy profit from the young (pushing prices higher by doing so), isn't right.
I must say you do have a good point there.

There's a similar situation with houses in holiday areas, well-off people are buying them as second/holiday homes and that leads to locals being unable to afford to buy in their own area.

R11ysf

1,936 posts

183 months

Tuesday 25th August 2015
quotequote all
RYH64E said:
It seems strange to me, in any other business situation interest on loans is an acceptable cost that can be offset against profit, I don't understand why buy to let should be any different.
Simple, because housing is a necessity and also something of which we have a chronic shortage in this country. A manufacturer borrowing money to buy a machine to help make more widgets makes perfect sense to allow the interest charges to be deducted.

Being given a tax break to have a leveraged punt with the banks money in an asset class which is in short supply and necessary to the entire population seems less so. Hence why if you own them outright your are pretty much unaffected. Seems very fair to me.

RYH64E

7,960 posts

245 months

Tuesday 25th August 2015
quotequote all
R11ysf said:
RYH64E said:
It seems strange to me, in any other business situation interest on loans is an acceptable cost that can be offset against profit, I don't understand why buy to let should be any different.
Simple, because housing is a necessity and also something of which we have a chronic shortage in this country. A manufacturer borrowing money to buy a machine to help make more widgets makes perfect sense to allow the interest charges to be deducted.

Being given a tax break to have a leveraged punt with the banks money in an asset class which is in short supply and necessary to the entire population seems less so. Hence why if you own them outright your are pretty much unaffected. Seems very fair to me.
Companies can claim interest on mortgages to buy commercial property as an expense against tax, and I suspect (though haven't seen it in writing) that a Limited Company with a portfolio of mortgaged buy to lets could also still claim interest paid as an expense. It's just private investors that can't, surely that's strange?

PurpleMoonlight

22,362 posts

158 months

Tuesday 25th August 2015
quotequote all
RYH64E said:
Companies can claim interest on mortgages to buy commercial property as an expense against tax, and I suspect (though haven't seen it in writing) that a Limited Company with a portfolio of mortgaged buy to lets could also still claim interest paid as an expense. It's just private investors that can't, surely that's strange?
A company buying a property to operate from is doing so for the purpose of trade.

A personal BTL landlord isn't trading, they are investing for personal gain (yes I accept that some people consider it a business). What other personal investment would receive tax relief on the cost to invest? I can't think of anything off hand.

Rowley Birkin

26,304 posts

223 months

Tuesday 25th August 2015
quotequote all
RYH64E said:
Companies can claim interest on mortgages to buy commercial property as an expense against tax, and I suspect (though haven't seen it in writing) that a Limited Company with a portfolio of mortgaged buy to lets could also still claim interest paid as an expense. It's just private investors that can't, surely that's strange?
The rules are that companies with borrowing against resi properties will still get full relief.

I think this boils down to a question of scale. There is case law (look for JPJPJP's post in the other thread) where HMRC and taxpayers have locked horns about what is and is not a business. The decisions seemed to revolve around scale in deciding whether or not properties were an investment or a business. So, if you're a dentist by day and run half a dozen BTLs at weekends, chances are you're an investor. If your full time job is running a large portfolio of BTLs, chances are you're running a business.

The problem is for legitimate businesses that are not already companies. It looks like they will be hit by the rule changes. I suspect that policymakers are aware of the problem but they think too few businesses will be affected for it to be worth making an exception. They probably also think that it will generate a nice bit of revenue as such businesses pay SDLT on incorporation.


RYH64E

7,960 posts

245 months

Tuesday 25th August 2015
quotequote all
PurpleMoonlight said:
A company buying a property to operate from is doing so for the purpose of trade.

A personal BTL landlord isn't trading, they are investing for personal gain (yes I accept that some people consider it a business). What other personal investment would receive tax relief on the cost to invest? I can't think of anything off hand.
A personal BTL landlord could easily operate via a Ltd company, and I'm sure that many will. Same investment, same costs, but different tax treatment. In my mind, interest paid is a cost, that's how it's always been treated in the p&l.

In this instance it makes no difference to me as I'm mortgage free, but I was toying with the idea of buying another property when my daughter goes to university, if I do so I'll buy it through my existing (nothing to do with property) ltd company, provding my accountant say's that's do-able.

strattonkillick

146 posts

216 months

Tuesday 25th August 2015
quotequote all
I think that the example is wrong. Interest relief is being capped to 20%, so as I understand it, the amount of relief available to a 40% taxpayer will be calculated and then (effectively) halved. In the example quoted above the interest relief is restricted to 20% of the amount of interest paid. It will still push up higher rate taxpayers profits but not by the amount implied in the original article.

LeoSayer

7,308 posts

245 months

Tuesday 25th August 2015
quotequote all
RYH64E said:
It seems strange to me, in any other business situation interest on loans is an acceptable cost that can be offset against profit, I don't understand why buy to let should be any different.
This might be the thin end of the wedge.

http://www.standard.co.uk/business/markets/anthony...

CAPP0

19,601 posts

204 months

Tuesday 25th August 2015
quotequote all
budfox said:
No, I'm saying it's morally wrong to own more than one property. I grant you that the super-rich will always have multiple homes and such things will never change, but for Joe "born at the right time" Average to use his fortunate position to make a tidy profit from the young (pushing prices higher by doing so), isn't right.
Well who do you suggest own the properties people need to rent, then? The pixies?

ModernAndy

2,094 posts

136 months

Tuesday 25th August 2015
quotequote all
CAPP0 said:
Well who do you suggest own the properties people need to rent, then? The pixies?
That might work. I'm sure Frank Black and Kim Deal have plenty of money to put into flats and terraced houses.

JuniorD

8,628 posts

224 months

Wednesday 26th August 2015
quotequote all
budfox said:
No, I'm saying it's morally wrong to own more than one property. I grant you that the super-rich will always have multiple homes and such things will never change, but for Joe "born at the right time" Average to use his fortunate position to make a tidy profit from the young (pushing prices higher by doing so), isn't right.


If it's morally wrong to own more than one property, what should be done? Is it morally right to seize all these additional properties and give them away to those without?







HoHoHo

14,987 posts

251 months

Wednesday 26th August 2015
quotequote all
Do anyone know if this new tax will also hit commercial landlords (i.e. private individuals who own property rather than Ltd companies) or is it only residential?

HoHoHo

14,987 posts

251 months

Wednesday 26th August 2015
quotequote all
Do anyone know if this new tax will also hit commercial landlords (i.e. private individuals who own property rather than Ltd companies) or is it only residential?

Rowley Birkin

26,304 posts

223 months

Wednesday 26th August 2015
quotequote all
HoHoHo said:
Do anyone know if this new tax will also hit commercial landlords (i.e. private individuals who own property rather than Ltd companies) or is it only residential?
Only resi... at the moment.

ClaphamGT3

11,305 posts

244 months

Wednesday 26th August 2015
quotequote all
budfox said:
RYH64E said:
MTech535 said:
budfox said:
This is all excellent stuff. There is something morally wrong about Buy to Let (sorry OP) and anything that might help to bring down the basic cost of shelter for those unlucky enough to have been born too late is OK by me.

Invest in companies that make things, or design things, or research things, because those companies generate jobs and wealth for the nation. Buying up houses because you can and making a profit from those who can't isn't the right things to do.

Are you saying that it is morally wrong to rent out property you own?
What he means is that it's morally wrong to have a mortgage on a buy to let property, those of us fortunate enough to own our properties outright won't be affected by the change...

It seems strange to me, in any other business situation interest on loans is an acceptable cost that can be offset against profit, I don't understand why buy to let should be any different.
No, I'm saying it's morally wrong to own more than one property. I grant you that the super-rich will always have multiple homes and such things will never change, but for Joe "born at the right time" Average to use his fortunate position to make a tidy profit from the young (pushing prices higher by doing so), isn't right.
So why aren't "the young" looking for their opportunity to make a tidy profit instead of playing the entitled princess "it's not FAIR!!" Card?

ClaphamGT3

11,305 posts

244 months

Wednesday 26th August 2015
quotequote all
R11ysf said:
RYH64E said:
It seems strange to me, in any other business situation interest on loans is an acceptable cost that can be offset against profit, I don't understand why buy to let should be any different.
Simple, because housing is a necessity and also something of which we have a chronic shortage in this country. A manufacturer borrowing money to buy a machine to help make more widgets makes perfect sense to allow the interest charges to be deducted.

Being given a tax break to have a leveraged punt with the banks money in an asset class which is in short supply and necessary to the entire population seems less so. Hence why if you own them outright your are pretty much unaffected. Seems very fair to me.
What about farmers getting capital allowances on plant & machinery? People need to eat you know, food is a necessity so presumably this should be stopped too?

plasticpig

12,932 posts

226 months

Wednesday 26th August 2015
quotequote all
Nice easy target for Osborne. The government want to reduce the deficit. They can't just do this by making cuts; they need to increase the tax take. I suspect most BTL landlords voted Conservative so they are just reaping what they sowed.

Rowley Birkin

26,304 posts

223 months

Wednesday 26th August 2015
quotequote all
plasticpig said:
Nice easy target for Osborne. The government want to reduce the deficit. They can't just do this by making cuts; they need to increase the tax take. I suspect most BTL landlords voted Conservative so they are just reaping what they sowed.
I agree that BTL landlords are seen by just about every avaricious authority as a cash cow in need of milking. Local authorities are also trying to get their noses in the trough through additional licencing.

Yes, I imagine most BTL investors did vote Tory. Many are probably feeling mugged.

PurpleMoonlight

22,362 posts

158 months

Wednesday 26th August 2015
quotequote all
Rowley Birkin said:
Yes, I imagine most BTL investors did vote Tory. Many are probably feeling mugged.
They aren't alone, us shareholding directors are too .....

GT03ROB

13,268 posts

222 months

Wednesday 26th August 2015
quotequote all
PurpleMoonlight said:
Rowley Birkin said:
Yes, I imagine most BTL investors did vote Tory. Many are probably feeling mugged.
They aren't alone, us shareholding directors are too .....
Frankly I'd rather be mugged than raped as we would have been had Labour made it....