The future for the small BTL investor

The future for the small BTL investor

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Discussion

Phooey

Original Poster:

12,574 posts

168 months

Thursday 26th November 2015
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Just wondered what peoples thoughts are today for the small time BTL investor (less than 5 properties) now the ability of no longer being able to offset all their mortgage-interest against tax, plus the added 3% Stamp Duty per property?


I currently don't have any BTL's but was seriously contemplating buying one in the next year or 2. Certainly doesn't look so appealing now.

Eric Mc

121,779 posts

264 months

Thursday 26th November 2015
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Thread No. 5 on this topic I think.

mcbook

1,384 posts

174 months

Thursday 26th November 2015
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I'll probably get shot down for this but I believe the recent changes to BTL related taxation are a good thing.

It's fairly clear that the activity of BTL landlords has contributed to the house price growth that has made home ownership a dream for ordinary people in certain parts of the country. I see the recent changes as a way of cooling the BTL market and redistributing wealth.

Quite surprising from a Conservative government but what they're actually saying is "you're rich enough to own two (or more) properties so we're going to tax you a bit more". They're not brave enough to increase income tax so will raise some extra money by taxing BTLs.

A perfectly acceptable way to get some more money into the exchequer imo.

Certainly make it less attractive for investors and that's probably the point.

Phooey

Original Poster:

12,574 posts

168 months

Thursday 26th November 2015
quotequote all
mcbook said:
I'll probably get shot down for this but I believe the recent changes to BTL related taxation are a good thing.

It's fairly clear that the activity of BTL landlords has contributed to the house price growth that has made home ownership a dream for ordinary people in certain parts of the country. I see the recent changes as a way of cooling the BTL market and redistributing wealth.

Quite surprising from a Conservative government but what they're actually saying is "you're rich enough to own two (or more) properties so we're going to tax you a bit more". They're not brave enough to increase income tax so will raise some extra money by taxing BTLs.

A perfectly acceptable way to get some more money into the exchequer imo.

Certainly make it less attractive for investors and that's probably the point.
This is my thinking too - round my way 2 bed houses for sale are pretty scarce - it's an ok rental area so I would imagine this has added to house prices of these smaller properties.

This could be good news for the cash BTL investor though ?

mcbook

1,384 posts

174 months

Thursday 26th November 2015
quotequote all
Phooey said:
This could be good news for the cash BTL investor though ?
I suppose the tax relief stuff will be a problem for those with mortgages but not a concern for cash buyers. Stamp duty changes will hit them both though.

While I agree with the BTL changes I'm not so sure on the Govt's approach to the other side of the equation. The plans for discounted 'starter homes' seem a bit weird and it will be interesting to see it work in practice i.e. first time buyer pays 20% less than other guy for exactly the same house? Or will they have dedicated 'first-time buyer estates' where the houses are only available to FTBs?

Welshbeef

49,633 posts

197 months

Thursday 26th November 2015
quotequote all
mcbook said:
I suppose the tax relief stuff will be a problem for those with mortgages but not a concern for cash buyers. Stamp duty changes will hit them both though.

While I agree with the BTL changes I'm not so sure on the Govt's approach to the other side of the equation. The plans for discounted 'starter homes' seem a bit weird and it will be interesting to see it work in practice i.e. first time buyer pays 20% less than other guy for exactly the same house? Or will they have dedicated 'first-time buyer estates' where the houses are only available to FTBs?
Buy them within a company set up from the off then if Govt want to change the rules on debt interest not being a permitted exclusion from paying tax on it would be wholesale and send many companies bankrupt.

dai1983

2,902 posts

148 months

Thursday 26th November 2015
quotequote all
I have a BTL in the SE that we lived in but moved to the SW and rent here. Future plans were to either sell up and buy a primary residence or hang on as we are.

We currently have a repayment mortgage on the BTL and our LTV has just hit 65%. I'll be looking to get an interest only mortgage next year and my quick calulation figures that we would be £800 a year worse off once 100% of our interest is taxed.

The main thing that may put me off is a potential 3% stamp duty when buying a "2nd" place in the SW that we intend to live in. IMHO the only thing that will happen is that the governments tax income will increase and a small number of small landlords will end up selling SOME of their properties.

Eric Mc

121,779 posts

264 months

Thursday 26th November 2015
quotequote all
If you are buying a property to live in, why do you think that you will have to pay the 3% extra on the purchase price?

dai1983

2,902 posts

148 months

Thursday 26th November 2015
quotequote all
On the other thread there was some confusion over this situation where you buy a 2nd property but one which you want to live in?

All this is a few years off yet!

GT03ROB

13,208 posts

220 months

Thursday 26th November 2015
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A bubble that needs pricking. So a positive move for me.

Eric Mc

121,779 posts

264 months

Thursday 26th November 2015
quotequote all
dai1983 said:
On the other thread there was some confusion over this situation where you buy a 2nd property but one which you want to live in?

All this is a few years off yet!
You can't have two Main Residences at the same time. Having said that, the legislation has to take on board the fact that sometimes, due to circumstances, there may be instances when the previous main residence remains unsold at the time the replacement main residence is being purchased.

Although I expect that Capital Gains Tax will provide the underlying definitions as to what constitutes a Main Residence, the main difference between Capital Gains Tax and the new 3% Stamp Duty levy is the fact that CGT is charged when a property is SOLD by the owner - so its history of ownership and residency status will have been established by historical fact.

The new Stamp Duty rule has to anticipate what the owner intends at the date of purchase.

dai1983

2,902 posts

148 months

Thursday 26th November 2015
quotequote all
I may not be clear in my explanation:

- we bought Property A in 2010 and intended to stay living there
- work moved me 160 miles away and I travelled on the weekends for two years
- as a family decided to relocate and rent out property A with a permission to let on a residential repayment mortgage. This is still in place and we currently live in a rented property.
- very soon I intend on increasing our cash flow by changing to an interest only BTL mortgage
- in the future, say 4-5 years I'd like is to be able to purchase a place for us to live in since its pretty much set in stone I'll stay in the SW. Call this property B.

From the other thread it's possible I'd be liable for second property stamp duty on property B?

Eric Mc

121,779 posts

264 months

Thursday 26th November 2015
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Why?

Property B will be your main residence, won't it?

audi321

5,156 posts

212 months

Thursday 26th November 2015
quotequote all
Didn't want to start another thread on BTLs but sign this petition if you are against the new tax changes for BTL mortgage interest.

https://petition.parliament.uk/petitions/104880

Welshbeef

49,633 posts

197 months

Friday 27th November 2015
quotequote all
Eric Mc said:
Why?

Property B will be your main residence, won't it?
What if the chain falls through but you go through with the purchase and then off load your Old main residence as soon as you can sell it. Would you then be liable to extra 3%?

I know Eric Mc you say it will take case trials to find out but frankly that's of no use and this has dramatic impact to people £. It's all grey so those who are smart can get around it those not so bright get fked

Eric Mc

121,779 posts

264 months

Friday 27th November 2015
quotequote all
You will just have to wait until we see the detailed legislation. As I said - you can "What if?" until the cows come home but its rather pointless until we see the details.

On Money Box Live on Radio 4, a few hours after the Autumn Statement, a person phoning in raised some of the issues you have and the experts in the studio said just as I have, it's too early to know and we will have to wait until the full details are released.

My hunch is that it will follow the rules on Capital Gains Tax - but there will be differences because it's a different type of tax.

walm

10,609 posts

201 months

Friday 27th November 2015
quotequote all
mcbook said:
I'll probably get shot down for this but I believe the recent changes to BTL related taxation are a good thing.

It's fairly clear that the activity of BTL landlords has contributed to the house price growth that has made home ownership a dream for ordinary people in certain parts of the country. I see the recent changes as a way of cooling the BTL market and redistributing wealth.

Quite surprising from a Conservative government but what they're actually saying is "you're rich enough to own two (or more) properties so we're going to tax you a bit more". They're not brave enough to increase income tax so will raise some extra money by taxing BTLs.

A perfectly acceptable way to get some more money into the exchequer imo.

Certainly make it less attractive for investors and that's probably the point.
I could not agree with this more.
And I would go further and say I wish the government grew some balls and DID raise income tax.
It is utterly deplorable that they were thinking of taking £1,300 from the least well of when despite all the BS of the "squeezed middle" - I honestly can't imagine anyone would notice 40% going to 41% or the 45% rate going back to 50%.
It's absolutely nuts.
I would happily have paid £1,300 more a year if it meant someone almost on the bread line got to keep theirs. Of course I might have to delay the next car purchase or stay in the UK over the summer rather than head to the sun but that is NOTHING compared to potentially having to give up Sky TV wink no... I mean genuinely - losing that tiny buffer between carrying on as today, just about surviving with the odd treat for those on tax credits vs. pushing them into serious financial issues.

Phooey

Original Poster:

12,574 posts

168 months

Friday 27th November 2015
quotequote all
Another thought - I wonder if mortgage lenders will reduce their rates & fees if demand drops for BTL mortgages?


AyBee

10,522 posts

201 months

Friday 27th November 2015
quotequote all
audi321 said:
Didn't want to start another thread on BTLs but sign this petition if you are against the new tax changes for BTL mortgage interest.

https://petition.parliament.uk/petitions/104880
Not many signatures considering the amount of time it's been running - unlucky wink

Eric Mc

121,779 posts

264 months

Friday 27th November 2015
quotequote all
Exactly. It seems that the Chancellor has assessed the public mood correctly on this one.

It's the old political trick - spot the sector of society that is not popular with the masses - and tax 'em.

A few years ago it was banks. Now it's Buy to Let Landlords.