Landlords - what are you doing with new budget proposals?

[Limpetsmum]

I've got a couple of properties but with the latest budget suggesting that all rental income is taxed this will leave me in negative each month.
What are others doing with their buy to let properties - selling up?!?!

[PettsWoodParadise]

The change doesn't affect us as we come in below the threshold, despite having three properties. We also made sure when we invested that we had a good LTV so would have a cushion for voids and other unforeseen issues. It has always been taxed, but proposals mean that they will phase out relief at higher rate so only those whose combined job and rental income (after allowances) takes them over this threshold will be affected. Talk to your accountant as there are very legitimate ways to structure things that might help. If you are a member of RLA they have advice lines etc too.

[specialsubject]

nothing. Not enough income for tax. All declared.

perfectly livable though.

[PettsWoodParadise]

However having investigated further it is not just the income tax issue it is being taxed on turnover before mortgages - now that will affect us quite a bit. I think quite a lot of landlords missed this bit - i am embarrassed to say I did. Bother!

[Limpetsmum]

Pettswoodparadise - exactly! Affects everyone. Not sure what we'll be doing. We have ours for long term investment purposes and don't rely on the rent as income but it does mean it'll probably cost us a couple of hundred pounds a month to keep them going.

[Limpetsmum]

See below:



www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html?WT.mc_id=e_DM44560&WT.tsrc=email&etype=Edi_Pfi_New&utm_source=email&utm_medium=Edi_Pfi_New_2015_08_26&utm_campaign=DM44560

[winchester1]

I've cut every other cost I could and recently cleared the mortgage as I'd assumed the tax brake on the btl mortgage would go at some point.
I assume now this is all you can try to do, or sell up.

[tribpot]

So the main impact here is if you have a mortgage on your property so your profits at the moment are marginal as a large chunk of the income goes to pay the mortgage? I'm not aware that other businesses are going to be taxed on turnover, although dividends are taking a big whack next year as well (I run a limited company as a contractor).

[winchester1]

What happens if you move your btl to a limited company (think that's cheap to set up) and keep the profits within it paying yourself as an employee when you want to draw the money out? Of course there's the income tax issue but if its for retirement maybe not so much income tax.

[PettsWoodParadise]

My accountant has reassured me that we won't be as affected as implied by the article stating 'the mortgage interest restriction at higher rates should not affect [name of DH here] as he is not currently a higher rate tax payer.

If the properties are put into a company stamp duty would have to be paid on the transfer, there would be no annual personal exemption allowance (currently £11100) and if the property was worth over £1m it would incur additional annual tax on enveloped dwellings.'

[Anantara]

Don't you get a basic rate tax credit (last part of case study), so basic rate taxpayers will be paying just the same as now?

[PettsWoodParadise]

Yes, that is how I understand it as basic rate tax payers we are unaffected. I thought from article that the turnover would take us over the lower rate, but apparently that doesn't apply to us we can still offset mortgage interest and stay below threshold. The market will however be affected by those who are higher rate payers and some who may have invested in the past will not, resulting most likely in more stock for first time buyers.