So if the BTL crew are leaving...
Discussion
Where are they going to go? I've only got two properties so BTL isn't my main income by a long way, but I am/was planning on growing a portfolio. The idea was one on a repayment and the rest on interest only so I get a small income from it while chipping away at at least some debt. We currently have plenty of equity in the two (Living in one though). Have I not quite grasped the enormity of the tax changes here? I understand that you could match the returns with funds but you can't leverage that so slower growth. Is that a case of needing the money first to be able to jump the BTL ship? Just confused...had a plan to make life slightly better and rely less on the 9-5, now I'm clueless with what to do.
DomBertone said:
you could match the returns with funds but you can't leverage that so slower growth.
If you own properties, including as your own home, there's absolutely nothing to stop you raising money from that and investing in funds.Also a serious equity investor would be able to leverage a portfolio directly with a lender.
DomBertone said:
Where are they going to go? I've only got two properties so BTL isn't my main income by a long way, but I am/was planning on growing a portfolio. The idea was one on a repayment and the rest on interest only so I get a small income from it while chipping away at at least some debt. We currently have plenty of equity in the two (Living in one though). Have I not quite grasped the enormity of the tax changes here? I understand that you could match the returns with funds but you can't leverage that so slower growth. Is that a case of needing the money first to be able to jump the BTL ship? Just confused...had a plan to make life slightly better and rely less on the 9-5, now I'm clueless with what to do.
It seems that Mr Osborne's daft plan is working.I will be unsurprised to see the higher rate law modified when people making zero profit also have to pay tax. HMRC says no one will have to pay more tax than they make in profit; the accountants say otherwise.
That doesn't make investing in BTL a very good idea anymore, though. Generally speaking the BTL ship has sailed and, at the risk of overstretching the idiom, George Osborne is now taking pot shots at it with a f
king big tax cannon.What else to do? It will help if you can think of and get away with something illegal. The government in this country isn't fond of people bettering their lot more than a little and will put a stop to any major level of ambition. But start a business of some sort is probably the best option, if you have time. I wouldn't be investing in the stock market unless you REALLY know what you're doing because if you don't you're gambling.
13m said:
It seems that Mr Osborne's daft plan is working.
I will be unsurprised to see the higher rate law modified when people making zero profit also have to pay tax. HMRC says no one will have to pay more tax than they make in profit; the accountants say otherwise.
That doesn't make investing in BTL a very good idea anymore, though. Generally speaking the BTL ship has sailed and, at the risk of overstretching the idiom, George Osborne is now taking pot shots at it with a fking big tax cannon.
What else to do? It will help if you can think of and get away with something illegal. The government in this country isn't fond of people bettering their lot more than a little and will put a stop to any major level of ambition. But start a business of some sort is probably the best option, if you have time. I wouldn't be investing in the stock market unless you REALLY know what you're doing because if you don't you're gambling.
It's a weird one really, I can't understand why they are so determined to crush BTL - it's not going to resolve the "housing crisis" In central London a large percentage of rented properties are owned by institutions, how will it affect them? It probably wont and I can't see any of the old school London estates suddenly slashing their rental prices.I will be unsurprised to see the higher rate law modified when people making zero profit also have to pay tax. HMRC says no one will have to pay more tax than they make in profit; the accountants say otherwise.
That doesn't make investing in BTL a very good idea anymore, though. Generally speaking the BTL ship has sailed and, at the risk of overstretching the idiom, George Osborne is now taking pot shots at it with a f
king big tax cannon.What else to do? It will help if you can think of and get away with something illegal. The government in this country isn't fond of people bettering their lot more than a little and will put a stop to any major level of ambition. But start a business of some sort is probably the best option, if you have time. I wouldn't be investing in the stock market unless you REALLY know what you're doing because if you don't you're gambling.
RanchoGrande said:
13m said:
It seems that Mr Osborne's daft plan is working.
I will be unsurprised to see the higher rate law modified when people making zero profit also have to pay tax. HMRC says no one will have to pay more tax than they make in profit; the accountants say otherwise.
That doesn't make investing in BTL a very good idea anymore, though. Generally speaking the BTL ship has sailed and, at the risk of overstretching the idiom, George Osborne is now taking pot shots at it with a fking big tax cannon.
What else to do? It will help if you can think of and get away with something illegal. The government in this country isn't fond of people bettering their lot more than a little and will put a stop to any major level of ambition. But start a business of some sort is probably the best option, if you have time. I wouldn't be investing in the stock market unless you REALLY know what you're doing because if you don't you're gambling.
It's a weird one really, I can't understand why they are so determined to crush BTL - it's not going to resolve the "housing crisis" In central London a large percentage of rented properties are owned by institutions, how will it affect them? It probably wont and I can't see any of the old school London estates suddenly slashing their rental prices.I will be unsurprised to see the higher rate law modified when people making zero profit also have to pay tax. HMRC says no one will have to pay more tax than they make in profit; the accountants say otherwise.
That doesn't make investing in BTL a very good idea anymore, though. Generally speaking the BTL ship has sailed and, at the risk of overstretching the idiom, George Osborne is now taking pot shots at it with a f
king big tax cannon.What else to do? It will help if you can think of and get away with something illegal. The government in this country isn't fond of people bettering their lot more than a little and will put a stop to any major level of ambition. But start a business of some sort is probably the best option, if you have time. I wouldn't be investing in the stock market unless you REALLY know what you're doing because if you don't you're gambling.
13m said:
I cannot make up my mind whether the measures are far cleverer than I can comprehend, or whether they are the most retarded piece of tax law in the history of retarded tax laws. I fear it is the second option, which saddens me somewhat because I have always supported the Tories and I really don't think I can anymore.
I'd go with 2nd as wellRanchoGrande said:
I'd go with 2nd as well
The policy change which is to be tapered in over the next few years was written by a......wait for it... University Graduate who studied Geography. It was billed as 'removal of relief's' Which avoided using the word tax in the title. It would only effect the wealthy landlords and level the housing market field. All of which is absolute nonsense.
I understand there is a dramatic rise in Stamp Duty on 2nd Homes coming up. The figures I saw were for a £140k house, previously £400 and will become £4750 - which is big, but the market will adjust for it and within 12 months it'll be business as usual, surely.
Is there more to it than that? If so, can someone direct me to a summary of all the changes?
Is there more to it than that? If so, can someone direct me to a summary of all the changes?
RedroPodriguez said:
I understand there is a dramatic rise in Stamp Duty on 2nd Homes coming up. The figures I saw were for a £140k house, previously £400 and will become £4750 - which is big, but the market will adjust for it and within 12 months it'll be business as usual, surely.
Is there more to it than that? If so, can someone direct me to a summary of all the changes?
That's small beer. The bigger news is that higher rate tax relief for mortgage debt is being withdrawn for all landlords that are not companies. The rules don't only apply to new debt, it is ALL debt. Is there more to it than that? If so, can someone direct me to a summary of all the changes?
What this means is that whereas landlords could once offset all finance costs against profit, they will only be able to offset some. On the face of it this seems trivial. In practice it means that some landlords will be paying tax when they have made no profit.
There will be many others who are making insufficient profit to operate their properties but be unable to sell them because they will be unable to afford the resulting CGT bill.
It also means that business A which happens to be a company will pay corporation tax (20%ish) whereas a sole trader B with exactly the same size portfolio may have an effective tax rate of 100%+.
Furthermore, BTL investors with properties held in cash will not be affected. Those with mortgages will.
Here is an accountant's explanation:
http://www.accountingweb.co.uk/article/osborne-s-r...
Simple though costly solution initially is via a company.
Because if you leave the assets in and only draw a minimum amount out one day you can cash out of the whole lot and enjoy entrepreneurs relief of 10% tax on cash in the bank as well as the total capital value.
Plus you can expense your travel around the properties, maintenance, reclaim VAT etc..
Because if you leave the assets in and only draw a minimum amount out one day you can cash out of the whole lot and enjoy entrepreneurs relief of 10% tax on cash in the bank as well as the total capital value.
Plus you can expense your travel around the properties, maintenance, reclaim VAT etc..
Good read 13m thanks. Hard to believe it's more efficient to just wrap it all up and cash in 
. I guess I could buy an M2, live it up for a year, and then spend the rest of my life slaving away like George seems to want. Didn't think it would be the Tories installing a 'why bother' attitude...
Oh hang on, he's going to take most of the sale proceeds in CGT isn't he, balls. Well, I like the little fiat 500's anyway.
After buying a load of Lloyds at 78p I really don't think I'm cut out for the markets either
. I guess I could buy an M2, live it up for a year, and then spend the rest of my life slaving away like George seems to want. Didn't think it would be the Tories installing a 'why bother' attitude...Oh hang on, he's going to take most of the sale proceeds in CGT isn't he, balls. Well, I like the little fiat 500's anyway.
After buying a load of Lloyds at 78p I really don't think I'm cut out for the markets either
13m said:
That's small beer. The bigger news is that higher rate tax relief for mortgage debt is being withdrawn for all landlords that are not companies. The rules don't only apply to new debt, it is ALL debt.
What this means is that whereas landlords could once offset all finance costs against profit, they will only be able to offset some. On the face of it this seems trivial. In practice it means that some landlords will be paying tax when they have made no profit.
There will be many others who are making insufficient profit to operate their properties but be unable to sell them because they will be unable to afford the resulting CGT bill.
It also means that business A which happens to be a company will pay corporation tax (20%ish) whereas a sole trader B with exactly the same size portfolio may have an effective tax rate of 100%+.
Furthermore, BTL investors with properties held in cash will not be affected. Those with mortgages will.
Here is an accountant's explanation:
http://www.accountingweb.co.uk/article/osborne-s-r...
Looking through the examples on that page, it seems as though it's going to be a very difficult time for people with large portfolios.
What this means is that whereas landlords could once offset all finance costs against profit, they will only be able to offset some. On the face of it this seems trivial. In practice it means that some landlords will be paying tax when they have made no profit.
There will be many others who are making insufficient profit to operate their properties but be unable to sell them because they will be unable to afford the resulting CGT bill.
It also means that business A which happens to be a company will pay corporation tax (20%ish) whereas a sole trader B with exactly the same size portfolio may have an effective tax rate of 100%+.
Furthermore, BTL investors with properties held in cash will not be affected. Those with mortgages will.
Here is an accountant's explanation:
http://www.accountingweb.co.uk/article/osborne-s-r...
Looking through the examples on that page, it seems as though it's going to be a very difficult time for people with large portfolios.
ringram said:
Simple though costly solution initially is via a company.
Because if you leave the assets in and only draw a minimum amount out one day you can cash out of the whole lot and enjoy entrepreneurs relief of 10% tax on cash in the bank as well as the total capital value.
Plus you can expense your travel around the properties, maintenance, reclaim VAT etc..
Not simple, and probably prohibitively costly.Because if you leave the assets in and only draw a minimum amount out one day you can cash out of the whole lot and enjoy entrepreneurs relief of 10% tax on cash in the bank as well as the total capital value.
Plus you can expense your travel around the properties, maintenance, reclaim VAT etc..
A sole trader will pay a minimum of 1% SDLT at market value upon incorporation, plus CGT at the applicable rate (say 28%) unless he / she qualifies for incorporation relief. This will depend upon whether the operation is a business or an investment portfolio.
If the property owner has debt in excess of the original CAPITAL value of the asset he / she will have to pay CGT on the margin between debt and capital value upon incorporation, even if he / she qualifies for incorporation relief.
Finally, property businesses don't qualify for entrepreneurs relief.
Oh and really finally, George Osborne has been stupid enough to run with this crackpot scheme, would you put it past him saying in 3 years time, "I am going to also tax to death any company holding residential property".
I'm still thinking that BTL may be the only option for me and my partner, that path seems the most clearest (excusing the tax minefield), it has just got a lot longer. It was an early retirement idea first and foremost anyway, just hoped for a small income on the way. As long as we keep the borrowing to a safer lower level it could still work.
Right??
Right??
DomBertone said:
I'm still thinking that BTL may be the only option for me and my partner, that path seems the most clearest (excusing the tax minefield), it has just got a lot longer. It was an early retirement idea first and foremost anyway, just hoped for a small income on the way. As long as we keep the borrowing to a safer lower level it could still work.
Right??
The chancellor has made it clear that he likes BTL as much as he likes haemorrhoids, so don't rule out him meddling further.Right??
Also keep in mind that regulation of private rented housing will be heading your way sooner or later. Compliance can be a hugely costly affair.
RanchoGrande said:
It's a weird one really, I can't understand why they are so determined to crush BTL - it's not going to resolve the "housing crisis" In central London a large percentage of rented properties are owned by institutions, how will it affect them? It probably wont and I can't see any of the old school London estates suddenly slashing their rental prices.
They are shifting out the amateur landlords who like all amateur investors will price risk incorrectly and also don't always need to be making a clear profit etc and the aim is not to end BTL but to leave it to institutional funds who it is argued will be at less default risk, won't over bid and will manage the assets competently. Obviously on paper this sounds sensible but if we use the pension industry as an example and look at how competent and efficient at buying and running corporate property then I'm not convinced there is much hope.
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