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Original poster

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

61 replies

maggiethecat · 14/05/2016 23:58

Although new rules start to take effect from next tax year and on sliding basis I am concerned that parental contributions at my daughter's school is calculated based on income as per tax returns. If property income is used to calculate fees without consideration of mortgage expenses we will not be able to afford fees.
Although we see the intentions of the govt in implementing these rules surely it cannot be right to apply the same principles in assessing family income to determine fees.
Is anyone with children at specialist music/dance/drama school affected by these rules?

OP posts:
ReallyTired · 15/05/2016 00:37

If you have properties plural then surely the answer is to sell some and clear the debts and have a far lower mortgage on your remaining properties.

Original poster
maggiethecat · 15/05/2016 00:36

additional £2k in tax....

OP posts:
Original poster
maggiethecat · 15/05/2016 00:35

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.

I would have an additional £k in tax but also an additional £1k in fees (about 10%) of income.

OP posts:
Balletgirlmum · 15/05/2016 00:28

As far as I am aware you are assessed on your income, not assets. I'm not sure whether savings are taken into account.

Original poster
maggiethecat · 15/05/2016 00:26

Not so easy - properties are mortgaged so to transfer them into company not straightforward plus I believe there are tax implications for the transfers.

OP posts:
ReallyTired · 15/05/2016 00:25

Surely if you have a large asset like a second property it's not unreasonable to expect you to sell it to pay the fees or at least extend the mortgage to release equity. I assume that savings are taken into account when awarding a bursery.

Tax relief is not disappearing it is being reduced from 40% to 20% for high earners. If you rent a flat for 10k (net) and have 10k mortgage you will pay an additional 2k a year in tax as a worse senario. Most landlords have considerably smaller mortgages as a lender would insist on 40% ltv and rent covering 125% of mortgage. The additional tax is not as much as you think. If both parents are high tax earners then the bursery is likely to be limited anyway.

Balletgirlmum · 15/05/2016 00:22

Would the answer be to perhaps set up a limited property rental company maybe with separate accounts. (Don't know whether this would work within the rules)

Original poster
maggiethecat · 15/05/2016 00:20

Tigger even

OP posts:
Original poster
maggiethecat · 15/05/2016 00:18

Ballet that is the issue - calculations at the moment are done on profit which makes sense.
Triggery, I could earn £100 and pay out £90 in mortgage interest - £100 is not therefore going to my family income - why should my daughter's fees be calculated on £100?

OP posts:
Tiggeryoubastard · 15/05/2016 00:08

Why not? Whether you're paying mortgage interest on it or not, it's income.

Balletgirlmum · 15/05/2016 00:06

Dd isn't on an MDS so I'm afraid I don't know much about this.

Is the issue that you will be assessed on rental turnover rather than profit?

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