Specialist Music School - fee contributions affected by new rules on rental income tax

Rental income is similar to a shares dividend. It is not earned in the sense that you do not to do actual work to get paid. In the past those with lots of money used to buy shares to create income rather than property. Buying shares helps companies expand, but there is an element of risk. BTL has become popular because property tends to be less volitile.

If someone borrowed 100k to invest in shares would they be allowed to offset the interest if they were an individual?

Personally, if you only have to pay £5k on an income of £50k I think yore onto a winner. We pay £9k on an income of £42k. misses point

really I think what you mean is rental income is passive income? Unearned income is deferred revenue and as taxes are done on a cash basis you shouldn't be taxed on unearned income that you would see on the financials.

A plumber income is earned, where as rental income is unearned. Owning. Btl is akin to owning shares. You don't have to work particularly hard to get the money.compared with the plumber. I don't think it's unreasonable to consider assets over a certain value.

I may be wrong about the savings if it's over a certain level.

It's not into the bursar want2be. All the bursar will do is forward the filled in income forms to the MDS people who will then pay the school the government contribution. The school will bill the OP the remainder.

It's a bit like it's not up to a university how much student loan/tuition fees contribution a student gets.

The new rules are backwards because a sole practioner, who was say a plumber, would have their income after expenses considered rather than gross income.

I would be calling the bursar and asking what their policy is. I doubt you are the only one in this position. FWIW if you are not making much money on your 2nd property it might be an idea to sell it and invest the money through a retirement account. Both you and your OH can stash cash in there and invest in lower overhead investments. If you like having leverage trade on margin. As someone who put their rental properties in a company formation (I did it offshore as I live abroad and I qualify for non-Dom status as born outside of the UK) I would question if BTL is the right sort of investment for a UK citizen subject to these new taxes who doesn't run their BTL as their main business.

Actually the aim of the scheme is that children of all incomes should be able to access the training on a sliding scale according to parental income - as it happens there is a middle ground whereby middle earners are the ones who struggle to pay their contribution - the ones at the very bottom & very top of the scale don't have such a problem.

It's not fair if they change the rules part way through a child's education. On an income of £30000 an employed person may be asked to pay £1,800 per year but on an income of £50,000 that shoots up to £5,000 & if several thousand of that income isn't actually take home income it makes a heck of a difference.

On a family income of £80,000 you would be asked to pay around £10k per year.

Children who are talented and disadvantaged. The kids of the asset rich are not disadvantaged.

I didn't realise this was a government scheme though, I thought it was just like a normal bursary however if this really is down to the government then it's the first time in a long time I agree with them. Finding should not be diverted from those who genuinely need it to those who choose to try and hide their wealth in assets in the assumption that they will be protected by governments who ordinarily seek to entrench privilege. This is possibly the only example of privilege not being entrenched in the arts sphere and I think it's great.

Uhtred - the schools do not make the rules - the government do. This is money given to a small number of centres of excellence (& it also affects part time after school CAT - so that children who are talented in music or dance can access specialist training.

And yes - if the stated basis for assessing a company was income then they would assess it on income, not on profit. Because they are two different terms with two different meanings. If they meant profit they would say profit. If they say income then they mean income.

This is nothing to do with tax other than tangentially. The school can offer funding as it wishes. IMO it's absolutely right that asset rich people should find that their happy situation impacts on eligibility for funding. The funding is there to help the disadvantaged not the asset rich. AFAIA 'ordinary' private schools can and do require parents to release equity in their homes if they have shit loads but are declaring a low income. It's all just another dodge - asset rich people say 'oh but my income is so low, it's so unfair' while hoping nobody notices that actually their true financial position is far better than people with higher incomes but few (or no) assets. It's just another way of trying to entrench privilege - pretending that to be asset rich isn't being rich per se. Well - it is. Capital is almost always more secure than income. Not least because when those situations that impact capital (recession, house prices crash) happen incomes get hammered too and while assets can recover (see the last turn of the merrygoround) incomes sometimes never do.

Sell one of your properties. Realise the unearned increase in capital you will almost certainly have waiting for you. Pay the fees. Let someone who needs the funding have the funding.

I can see your point that it's unfair to penalise someone for owning properties if they aren't penalised for having shares or savings.

Are you feeling sore about additional tax and fees or us really a case you cannot afford the extra 2k per year? I don't know how many years your child would be at ballet school, but is remortgaging one of properties to release a bit if equity and get a better mortgage deal an option? If your tax increase makes having a btl unaffordable don't you think you are wise to look at selling before interest rates return to normal levels.

As a first timer buyer I paid 8.6% on my first mortgage many moons ago and that was an introductory rate. Could you cope with a mortgage rate of 8.6%. It could be worse and residential mortgages are usually lower.

It's nothing to do with tax really tired. And unless the op split up with her partner transferring a property would make no difference as fee calculations are fine on family income.

I agree Maggie. And it has to be taken into consideration that children who apply to these schools are encouraged to apply on the basis that places will be awarded
& funding offered on the basis of talent only. The funding is meant to make the schools accessible to everyone

It's bed time. I meant principal residence.

"Reallytired, savings are not considered. By your reasoning people with plenty of equity in their homes could be asked to release equity to pay fees."

There is a difference between selling your principle residence and a second home. If you sell your principle home you still need to find somewhere to live. However a buy to let is an investment that can be realised without making yourself homeless. It's no different to selling shares.

I suggest you talk to an accountant about legal ways of minimising tax. If one partner is a basic rate tax payer then it would make sense to put 90% ownership in that person's name.

That would be the equivalent of asking someone to leave their job because then they could sell their car.