150% tax for BTL investors?!?!?!?
Discussion
Rowley Birkin said:
You're comparing apples and pears.
The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
Well actually it is equitable depending on your point of view.The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
Ltd will get 20% tax relief on interest.
Individuals will get 20% tax relief on interest.
PurpleMoonlight said:
Rowley Birkin said:
You're comparing apples and pears.
The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
Well actually it is equitable depending on your point of view.The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
Ltd will get 20% tax relief on interest.
Individuals will get 20% tax relief on interest.
To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
yes, landlords with a higher income have had a big advantage over landlords with small incomes and companies with any amount of income
they have been able to offset finance costs at 45% or 40% versus 20% (reducing soon to 18%) for companies
the new rules are very welcome as they remove that unfair advantage that has encouraged huge leverage for some landlords to the detriment of other buyers.
they have been able to offset finance costs at 45% or 40% versus 20% (reducing soon to 18%) for companies
the new rules are very welcome as they remove that unfair advantage that has encouraged huge leverage for some landlords to the detriment of other buyers.
JPJPJP said:
yes, landlords with a higher income have had a big advantage over landlords with small incomes and companies with any amount of income
they have been able to offset finance costs at 45% or 40% versus 20% (reducing soon to 18%) for companies
the new rules are very welcome as they remove that unfair advantage that has encouraged huge leverage for some landlords to the detriment of other buyers.
Yes, but companies are still taxed at the same rate as their relief. That's my point. Sole traders will be taxed at a higher rate.they have been able to offset finance costs at 45% or 40% versus 20% (reducing soon to 18%) for companies
the new rules are very welcome as they remove that unfair advantage that has encouraged huge leverage for some landlords to the detriment of other buyers.
Rowley Birkin said:
No it isn't. If companies had marginal rates of tax at 20, 40 and 45% it would be. But they don't.
To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
This isn't quite correct. To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
Whilst the company can offset interest costs etc, any profit will still need to be taxed as personal income as well.
When you take this into account, there isn't the scale of difference your post suggests.
EddieSteadyGo said:
Rowley Birkin said:
No it isn't. If companies had marginal rates of tax at 20, 40 and 45% it would be. But they don't.
To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
This isn't quite correct. To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
Whilst the company can offset interest costs etc, any profit will still need to be taxed as personal income as well.
When you take this into account, there isn't the scale of difference your post suggests.
Rowley Birkin said:
Yes, but companies are still taxed at the same rate as their relief. That's my point. Sole traders will be taxed at a higher rate.
indeed, just as if the investment had been made in anything else except BTL (other than that no relief at all is available on finance costs for other speculation)and just as if the employees / shareholders were drawing money from the company holding the investment properties - that would be taxed as normal income
BTL has been an anomaly for a long time and, even after these changes, it remains an anomaly in terms of tax relief on finance costs for an investment
Not many other countries allow such relief do they?
13m said:
That depends upon whether profits are drawn.
Yes of course this is true. The point I was commenting on was the comparison being made between the equivalent tax regimes applied to sole traders and limited companies.
To make this comparison valid, I was just saying both corporation tax and personal tax need to be taken together
Be interested to see how the offshore effects get picked up. Basic rate tax only at the mo and property under £2m there's no cgt on sale through sale of shares (though liability on eventual liquidation of the asset) or sdlt on sales of shares. No corporation tax either.
Just getting a mortgage. ... only takes one bank to get brave.
Just getting a mortgage. ... only takes one bank to get brave.
Rowley Birkin said:
Eric Mc said:
As will individuals. It's just that for individuals it will be restricted to their basic rate of Income Tax i.e. 20%. For companies it is restricted to their rate of Corporation Tax i.e. also (currently) 20%.
You're comparing apples and pears. The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
Eric Mc said:
Rowley Birkin said:
Eric Mc said:
As will individuals. It's just that for individuals it will be restricted to their basic rate of Income Tax i.e. 20%. For companies it is restricted to their rate of Corporation Tax i.e. also (currently) 20%.
You're comparing apples and pears. The relevant point is that companies will receive full relief upon debt interest, higher rate tax paying sole traders will receive a fraction of that. They may be operating identical businesses. It's not equitable, is it.
And that was always the case, because individuals reach higher rates of Income Tax at much lower levels of income than companies reached their higher rates of Corporation Tax. There have always been anomalies in the tax treatment of rental income between individuals and companies. It's just that the landscape has changed to make company owned properties slightly more attractive than they once had been.
There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
Eric Mc said:
And that was always the case, because individuals reach higher rates of Income Tax at much lower levels of income than companies reached their higher rates of Corporation Tax. There have always been anomalies in the tax treatment of rental income between individuals and companies. It's just that the landscape has changed to make company owned properties slightly more attractive than they once had been.
There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
But something fundamental has changed. Companies will continue to pay no tax if they make no profit, many sole traders will.There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
Rowley Birkin said:
No it isn't. If companies had marginal rates of tax at 20, 40 and 45% it would be. But they don't.
To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
You are forgetting that the profit from a Ltd still has to be got out of the Ltd to the shareholders which would incur more tax charges for higher rate tax payers, whereas the sole traders already has it.To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
In fact, with the new 7.5% dividend tax the sole traders may be better off.
PurpleMoonlight said:
Rowley Birkin said:
No it isn't. If companies had marginal rates of tax at 20, 40 and 45% it would be. But they don't.
To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
You are forgetting that the profit from a Ltd still has to be got out of the Ltd to the shareholders which would incur more tax charges for higher rate tax payers, whereas the sole traders already has it.To put it another way: Companies will get "full relief", sole traders will get "fractional relief".
In fact, with the new 7.5% dividend tax the sole traders may be better off.
I feel like someone is now holding a knife to my neck as I only started doing this a few years ago and now its going to be over. I accept its the common sense thing to do because its an unproductive income source and I guess its my fault for assuming millibrand's handout party would be in power.
My view is there will be no sustainable recovery, no rate rise and more QE; they will need to keep buy to lets going to maintain a level of fictitious growth in a stagnant economy.
My view is there will be no sustainable recovery, no rate rise and more QE; they will need to keep buy to lets going to maintain a level of fictitious growth in a stagnant economy.
I personally think everyone should take a deep breath. Osbourne announces vague concept in a speech. No details, no-one really knows what it means, and therefore cannot predict what effect it will have.
Wait for the white paper to be produced, and study that to see what effect this change is likely to have on you - then make a move to mitigate it.
It's not worth acting at the moment - there is no change to current situation, and you don't know what the changes are going to be.
BTW BTL a moral travesty ....... really?? If this didn't happen there would be loads of empty houses with many people looking to live in them, but unable to get loans to do so. BTL has been a clever government scheme to get private capital into public housing, in return for low yields.
Wait for the white paper to be produced, and study that to see what effect this change is likely to have on you - then make a move to mitigate it.
It's not worth acting at the moment - there is no change to current situation, and you don't know what the changes are going to be.
BTW BTL a moral travesty ....... really?? If this didn't happen there would be loads of empty houses with many people looking to live in them, but unable to get loans to do so. BTL has been a clever government scheme to get private capital into public housing, in return for low yields.
13m said:
Eric Mc said:
And that was always the case, because individuals reach higher rates of Income Tax at much lower levels of income than companies reached their higher rates of Corporation Tax. There have always been anomalies in the tax treatment of rental income between individuals and companies. It's just that the landscape has changed to make company owned properties slightly more attractive than they once had been.
There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
But something fundamental has changed. Companies will continue to pay no tax if they make no profit, many sole traders will.There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance Tax.
Eric Mc said:
13m said:
Eric Mc said:
And that was always the case, because individuals reach higher rates of Income Tax at much lower levels of income than companies reached their higher rates of Corporation Tax. There have always been anomalies in the tax treatment of rental income between individuals and companies. It's just that the landscape has changed to make company owned properties slightly more attractive than they once had been.
There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance
But something fundamental has changed. Companies will continue to pay no tax if they make no profit, many sole traders will.
Not so sure about that interpretation. Both companies and individuals will get their 20% tax relief on interest paid.There is still the issue of tax effective extraction of the income from the company by the company owners. That problem hasn't gone away so anyone who is thinking buying or moving properties to a limited company needs to be sure they are fully aware of ALL the tax implications of doing so i.e. not just Income Tax or Corporation Tax but also Capital Gains Tax, Stamp Duty and even Inheritance
But something fundamental has changed. Companies will continue to pay no tax if they make no profit, many sole traders will.
Companies will not pay tax unless a profit is made. Sole traders may have to pay tax on a loss
http://m.accountingweb.co.uk/article/osborne-s-ref...
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