Wrong landlords getting targeted!

[Guiltydilemma]

I know as a landlord I'm unlikely to get much sympathy but feel that myself and my husband are in that bracket that always end up giving to the economy but never getting anything out of it and the the new tax rules for landlords are just the icing on the cake!
We both work and earn just enough not to be eligible for any tax credits and live in a very expensive city which is where we grew up. Average house price for 2 bed flat is about £300k!
We inherited a little money and decided to invest in property as this is the only way I can foresee us being able to help our kids on the ladder, help them if they want to go to university etc. without our help to live in the area they've grown up it will be impossible. we don't earn much and don't get any help from the government apart from child benefit despite our small flat costing 9 times what our combined salary is. We have high mortgages on our rental properties and residential home and now the government is going to screw us over taxing us to the hilt on these! On the other hand my friend who has several buy to let properties mortgage free is going to be unaffected by the new tax rules! How is that fair!!! For this that aren't aware of the way the new rules are going to work the government are going to decrease over the next few years the amount of mortgage interest you can offset as an expense! Grrrr

Oh FFS - not read the whole thread, but you can still claim lower rate tax relief. So it will affect the higher earners after all, rather than the lower ones.

If only BTL landlords weren't so grabby, hoovering up properties in some areas, normal, average people might find properties a touch more affordable.

Crikey OP, the living and selling within 3 years idea to avoid CGT sounds like a (bastardized) version of the tax law on PPR extension which was updated/grossly reduced Autumn 2013....and you do know you have to pay CGT on a BTL before you can gift it whilst alive irrespective of how long you live....you're getting confused with the IHT rules (which would still also be potentially applicable). Just saying.

Have now re read the full thread and think that you urgently need some tax advice as you keep coming out with things that you think you can do to avoid various taxes but you cant as per the post from squaredolphin.

did you take independent advice originally?

wouldn't it be best for all concerned (your children in particular) if you set aside some money and time now to find out what you can and cannot do with your property?

About 95% of BTL mortgage providers don't allow letting to housing benefit tenants within their mortgage terms and conditions. I do hope you aren't in breach of your T&Cs, otherwise your mortgages are liable to be repaid as soon as the company finds out and your poor tenants will be homeless. This happened to a friend of mine who had a landlord who thought they were cleverer than the banks and HMRC.

The government is actually targeting the right people to provide stability to the housing market.

With the new BASIL III regulations being phased into the banking sector over the next few years the quickest way to avoid any potential shocks is for the government to pre-empt these regulations and squeeze out all the landlords that have a large amount of leverage as these will cost the banking system the most under the new liquidity and capital rules.

As the new rules come into force anyone with high LTV BTL mortgages will start to get hit by big hikes in interest as they go to refinance. The reason for this is that the banks will need to maintain a lot more capital for that BTL mortgage compared to an equivalent owner occupied mortgage under the new rules.

So effectively all these new disincentives to the BTL market are the government getting in front of this before it becomes a train wreak.

The upside also is that the government can effectively increase their tax intake at the same time as reducing a risky behaviour without spending any political capital while getting younger voters onboard. After all, if you are a landlord its not likely you will vote Labour... Turkeys don't vote for Christmas.

Why don't you use the money you were talking about in your other thread (£60K) to pay off your BTL mortgages and be mortgage free 'like your friend'?

Well, I'm sure it's far more complicated than I could go into here with a lot of other factors at stake but surely EITHER the housing prices drops or the rental market is neutral, it doesn't seem likely that both will happen.

If the prices fall slightly then some people who couldn't otherwise afford it will be able to buy but these people will be few and far between. I thought part of the issue was saving a deposit whilst paying high rents and whilst this will obviously be easier if the needed amount is smaller it's still difficult in an expensive rented house and will take time for people to raise, so people will buy maybe a year or two sooner? Which certainly in the short term means there will be the same demand for rental properties whilst people save deposits but less supply, unless the rental price drops they won't be able to save at a faster rate than before. The only people who will benefit immediately will be those with immediate access to a deposit who just couldn't take on the mortgage before.

I agree there will be longer term ramifications once this starts to even out -the ultimate aim of the gov is to reduce the cost of housing. I don't know it will have a massive effect to be honest but I'm no economist (as I'm sure you can tell!!)

Oooh what's her other thread?

the ultimate aim of the gov is to reduce the cost of housing

Anyone who believes that may like to see a bridge I have for sale .

The only thing that will reduce the cost of housing is more houses.

Nothing any government in the past 1 years has done has positively affected the rate of housebuilding. By their own statistics.

Said it before, and will say it again. Landlords are a blight on my community. Relatively poor northern city. 2/3 bed terraces used to be affordable (£45,000 to £60,000) for a low income family. Lots of landlords entered the market around 2008/09 and pushed the prices up dramatically in a short space of time.

Our street is turning into a (BT)L ghetto. For every 'responsible' landlord there are 5 others who meet minimum standards. So think crappy roofing, knackered windows, fencing. Some of the larger beautiful old 6 bedroom houses turned into cesspits (doesn't have to be that way - at least one LL has done a fab conversion - it is a CHOICE to DO IT ON THE CHEAP). More and more owner-occupiers move out and the downward spiral continues. We do what we can as a community - objecting to HMO licenses in particular.

coming your way soon as a buy to let landlord will be business rates on your rental properties rather than council rates. that's the govt next step I bet

sounds like a reasonable prediction, but how would that work,?
Would the tenant still pay council tax and the landlord also be subjected to business rates?

The government have completely fucked up house building. There is no incentive to do it and they are allow tiny numbers to be produced by inefficient organisations who are increasingly being allowed to build the "wrong" properties. Planning and land prices are ridiculous.

suzannecaravaggio from what I understand, the tenants would be liable for the council rates because these pay for local goods and services. the owners would be liable for business rates as it is a business premises.

as someone who pays -horrendous- business rates at the moment on a property, I actually think this is fair.

its a business just like mine so should be liable for business rates and business taxes. that's true whether you own 1 or 10 buy to lets.

I have a lot of sympathy for people who have ended up being landlords by default - had to move house due to work, cant sell current property so rent it whilst away etc. but for people like the OP this is a business that she is now running and therefore you need to treat it as such.

thanks for the info Mummymeister it'll be interesting to see what happens on that score

Oh I totally agree lurkinghusband - that's why I'm not sure it will have any great effect!

The population is increasing and even if all the landlords sold their houses it would only have a short term effect - soon enough we'd be right back where we started!
I'm sure these policies have temporary / short term effects though!

governments only think in temporary and short term ways though don't they. otherwise we would have all sorts of long term strategies in place for dealing with the aging population, birth rate peaks and schools, right size housing etc.

if looks like a business then it should be taxed like a business.

Myself and dh have a couple of property we let out mortgage free it's my dh pension I totally support the new tax changes btl landlords buying multiple properties highly leveraged with no intention of repaying the mortgages just hoping to eventually cash in on endless property hikes are partly responsible for the housing crisis. We will be paying the extra stamp duty not happily but we will and have offered less on the one we are purchasing next month because of the stamp duty and had to accept less on the one we are selling. I think next step should be banning interest only btl mortgages they should have to be repayment mortgages.

Totally agree lightening, you should not be able to pay interest only loans for BTL.

I'd also imagine BTL mortgage holders would be complaining if their current deal was extended to home owners.

oh boy. The bile-spewers must love this. Remember OP, having money is a sin on MN. Many on here cannot cope with others being richer than they are.

Making money out of BTL is also a sin here because somewhere to live is a human need. Selling food, being a teacher or a nurse are also human needs but those aren't sins, even MN isn't that stupid.

BUT property investment has risk. BTL with a mortgage has been very risky for a while now. OP, sorry but that's the deal. I also agree that BTL mortgages should be treated the same ways as residential ones; and I'm a landlord.

but those bleating 'there are other ways to save' are being fooled by the story of low inflation. It isn't low so savings at the current low rates are diminishing. That's why so many have gone into BTL, to provide FOR THEMSELVES later in life. Sod the kids.

OPs not rich. Her OP is all about how poor she is and how she can't afford a tax hike

and eeesh, she's not even "successful" she inherited her money.

I don't actually think the problem is that the OP has money tbf, I think its that she is whinging that her wealth subsidy is being taken away and she won't make as much money.

I rent a second home and it isn't that profitable after estate agents fees and tax. Nor should it be very profitable.
I personally should be taxed more on this income as I do very little for it - the house is freshly done up so I don't need to.
Btl mortgages should be more expensive anyway. I prefer a council run social housing model than private rentals but I don't know how this could ever happen now.
To answer you I would sell one of your properties and be very careful about creative accountancy - everything is electronically linked now and if you muck about you will eventually come a cropper.

I think Btl mortgages should have to be full repayment not interest only. Interest only residential mortgages are pretty much non existent now.

Also so called accidental landlords who couldn't seel.the property so rent it are part of the problem in skewing the market. They've stopped property being sold for what it's worth/what someone can actually afford to pay for it.

I'm very right wing on most things but Btl really infuriates me.

The op is a higher rate tax earner already if she is affected by the changes. If the op pays £400 interest then she is still getting a subsidy of £80 a month instead of £160. I am sure she will find the extra money.