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Buy to let: it's basically over for the average investor

(26 Posts)
Efferlunt Sat 29-Aug-15 11:14:05

I've just realised that the tax changes announced in the last budget will mean that btl is basically unworkable for most people. Even for those who are not higher rate tax payers. Turnover from rental income will now be considered as profit. So this will push loads of people into the higher tax band and wipe out profit from Btl.

This could have huge implications with most landlords having to sell up. I wonder what it will do to the housing market?

BoomChickenSoup Sat 29-Aug-15 11:21:28

Most landlords won't have to sell up. The changes will only really affect those who are borrowing a high LTV amount to purchase properties to let out. This is not most landlords. I think what the government is worried about is that highly leveraged landlords could potentially be a risk to the banks if the property values decreased and lots of them defaulted.

Makes me wonder if the government/banks are now ready to let the property market find it own way without the artificial props that have been in place for the last few years.

Efferlunt Sat 29-Aug-15 11:32:09

But most sensible landlords will have maxed out their ltv because of the tax breaks available at the time. Someone I know has been renting out their old home for 30 years and has it re-mortgaged every couple to ensure the LTV remains high, otherwise that money is sitting in the house instead on making a profit in the bank.

cruikshank Sat 29-Aug-15 11:35:52

If this is true, then it's a good thing. Even better if it means house prices come down. Houses should be homes, not investment vehicles.

howtorebuild Sat 29-Aug-15 11:38:31

I can see a great benefit to everyone other than the LL's.

SurlyCue Sat 29-Aug-15 11:40:26

Good. About time.

sleepwhenidie Sat 29-Aug-15 11:41:13

I agree, most LL will be borrowing, (even if they have available cash) to keep interest payments high and wipe out taxable profits. Some will have the cash, some will have bought on the basis of interest being tax deductible. The latter will probably get a nasty shock and I agree, will probably have to sell.

I think it's a good change though - you don't get to borrow obey to buy shares and offset the interest payable against dividends/capital gains, why should you be able to do the same with property purchased for investment? It's a good way of raising tax revenues and hopefully adjusting the property market a bit.

sleepwhenidie Sat 29-Aug-15 11:41:58

Obey=money !

specialsubject Sat 29-Aug-15 11:42:12

fine. Good luck getting that mortgage, eh? And of course with that attitude, you will not be selling your home for more than you paid for it, because that would breach 'it is a home, not an investment vehicle'.

Efferlunt Sat 29-Aug-15 11:43:01

I don't know if it means house prices will come down. It might mean less competing for young families who want to buy starter homes which is definitely a good thing but For those renters not in that position I don't think it will make things any easier.

Sunnyshores Sat 29-Aug-15 12:35:49

Wake up people, small scale LLs with the odd 'investment' property arent the problem and this new tax rule isnt going to mean the lower paid can suddenly afford to buy.

First, when lls struggle, rents will go up.
Yes, some landlords with 1 or 2 highly geared houses may well sell up... this wont affect the housing market in most areas.
More houses will be brought by larger property companies/institutions or the very rich (with cash).
Or the very rich will just buy them and do without the hassle of tenants and let them sit empty.
Housing will become a highly controlled, profitable business. No sentiment involved, ie late rent not tolerated, you'll just be a number.

It is incredibly naiive to think that this change means a better deal for tenants or for those wanting to buy. But because of this stupidity and petty jealousy, the govt will continue its push towards a rental market controlled by large institutions.

adr07 Sat 29-Aug-15 15:51:57

This change will hardly make any difference at all to the majority of investors. We manage over 250 properties and source them for our investors too. 80% of our investors are cash buyers, and the ones who have large portfolios run their properties through a Ltd company.
This won't affect the housing market one bit.

cruikshank Sat 29-Aug-15 20:12:38

I'd rather have a rental market controlled by large institutions provided that they were regulated properly, as happens in other countries. Privatising rental housing has been a massive disaster for this country - costs the tax payer £12 billion a year every year in housing benefit due to landlords charging whatever the fuck they want, causes 1 in 3 tenants to live in properties officially deemed to be substandard, due to landlords being able to do what the fuck they want, and both of these happening at a time when private sector renting is at its highest rate since before the 1960s due to 30 years of failed housing policy that these parasites have profited from.

Plus, on a nano-level, it will rid us of all the tiresome posts on mumsnet that address every single thread about housing with the words 'I am a lovely landlord and I charge under market rent', as though that made a fucking blind bit of difference other than to cause other people to want to stab you for being a pointless irritating cunt.

Sunnyshores Sat 29-Aug-15 21:53:48

I love it when the uniformed just tow the Govt and media line, whilst thinking theyre really radical and ethical - eating MacDonalds, banking with Barclays, wearing clothes made by child labour etc etc

Good luck with making large, probably foreign, institutes treat you fairly and provide you with decent housing, oh yes and pay tax on their profits.

cruikshank Sat 29-Aug-15 22:02:35

Well, home-grown small-time landlords are making a blindingly bad fist of it and the countries that do use institutional investors have much better private rental housing provision, so I'll go with what's been proven to work over what's been proven not to work.

specialsubject Sat 29-Aug-15 22:27:41

I am a good landlord and I charge market rent. Not under it. Go over it, no tenant.

want someone pointless? Check the mirror. If your mummy has one in the house.

roll on the new term...

oh, and do the mortgage companies tolerate late payment? News to me. Go spit bile at them.

PigletJohn Sat 29-Aug-15 22:32:18

Can anyone explain to me why, as an investor who buys shares and gold bars, my neighbour on one side of me can't offset his investment income against the loans he took out to buy them; but my neighbour on the other side, who is an investor who buys houses, can?

Once I know the reasons why it has been considered justifiable, I will be able to decide if it is wrong that in a few years, they will be treated the same.

lalalonglegs Sat 29-Aug-15 23:00:21

I suppose, PJ, because the mortgage is a business expense associated with renting the properties from which your neighbour receives an income. He does not receive any tax breaks with the actual purchase of the property. Your other neighbour also receives no tax break when buying his gold and shares. He has no income from his gold (but may have dividends from his shares on which he pays a lower rate of tax than income tax) but nor does he have any expenses associated with owning it so there is nothing to offset. It is just an asset smile.

PigletJohn Sat 29-Aug-15 23:53:18

The OP thinks that the BTL neighbour is an "average investor"

As in investor, why should he get tax relief on the interest for the loan he took out to buy his investment, which he can set against the income from that investment? No doubt, if my other neighbour could also get tax relief on his loan interest, he would reconstruct his affairs to take advantage of it. And if his tax breaks were gradually taken away, no doubt he would squeal "unfair"

sleepwhenidie thinks, "most LL will be borrowing, (even if they have available cash) to keep interest payments high and wipe out taxable profits."

Designsalmon Sun 30-Aug-15 06:48:47

Piglet john, according to below site, no tax is payable at all on dividends from shares unless you are a higher tax rate payer ie 40%, even then the rate you pay is lower at 25%. Landlords are not given such a great deal, rental income apart from expense deductions are taxed at normal income tax bands.

Also I don't believe your statement is correct that people who buy shares cannot offset their interest expense against their dividend income. They can, it is called buying on margin. The difference is that people don't tend to buy hundreds of thousands worth of shares at once like in property so they don't tend to borrow money to do this. In addition, financing against share purchase is a much riskier and expensive business since the lender's money is not secured against a stable asset like property, and buying shares on margin amplifies your returns or losses massively so it is much riskier for the investor also. All in all, it is only the most sophisticated of investors that buy shares on margin, and they can offset financing cost against income, often through a company also.

I wish people would judge after they got the facts right. If small scale landlords all sold, it is NOT good for the market, remember when prices tumbled in 2008, and all the first time buyers kept on renting rather than buying (pushing up rents at unprecedented rates) because they were too scared to buy for fear of buying into a falling market. Guess who benefits from such a market? Fat cats with millions of cash waiting to pounce, they won't care about tenants, or condition of properties, they just want to meet their return and yield targets.

Designsalmon Sun 30-Aug-15 06:50:06

VeryPunny Sun 30-Aug-15 07:02:14

Many LLs in the SE are benefitting from capital appreciation of their asset as well which will ease the pain of an reduced rental income.

Designsalmon Sun 30-Aug-15 07:11:02

Verypunny, what about landlords in other, less affluent parts of the country, where there has been little asset appreciation. It is often in these parts that private landlords play a vital role in provision of housing to lower income families that would simply not be able to buy (even if prices dropped by 10, 20, 50%). They fill a void that is left by local councils and housing authorities. They are more vulnerable to the implications of these tax changes whether due to landlords raising rent to offset higher tax or sell up entirely. This will only increase the burden on council housing, and there is a huge shortage there.

PigletJohn Sun 30-Aug-15 13:17:51


It is not true to suggest that Dividends are untaxed. The company has already paid tax, and there is currently an estimated allowance for this in the dividends received by the taxpayer, hence she only has to pay extra tax if she is at one of the higher rates.

In the old days, homeowners use to get tax relief on mortgage interest on their own homes. This was discontinued because it had no effect except to fuel house price inflation. I am sure that BTL landlords receiving a tax break has the same effect.

cruikshank Sun 30-Aug-15 22:54:28

Yes, designsalmon, there are so very many landlords that do what they do just to help lower income families out - they're pretty much Mother Theresa, The Pope and Jesus Christ himself rolled into one, so selfless are they. hmm

specialsubject - any time you can let us know that private sector landlords don't leach £12 billion a year every year in housing benefit off the state, or that 1/3 of their properties aren't substandard, do give us a shout, eh?

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