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

Am I being stupid - perhaps I am.
If you have mortgages on your btls then you can claim interest relief and then pay tax on the remainder. But your friend who doesn't have outstanding mortgages on her btls will not have the relief and will surely have to pay tax on the whole income from her properties - so the removal of interest relief will not affect her but she is already paying tax anyway?
Or is this not the case.
By the way, I struggle to feel it for you.

Oh wow so glad I've seen this thread. I left another thread today regarding prices being pushed up by btl as a skim read seemed populated with 'I'm just like a charity providing homes for those feckless poor that pay off my interest only loan that I never intend to repay, but will talk the market up as my only repayment vehicle is house price inflation' phew, that was a long sentence.

But hey everyone here rocks - you've got it nailed.

Btl crying because the money they borrowed to speculate on is to be discouraged going forward. Would anyone suggest people get loans to speculate £100,000 on stock exchange. No, bit risky as there are ups, bubbles and downs.

Google a online calculator. We let out our house as we live in rented place for work. I was suprised but the new tax rules don't effect us as we earn way, way under the 40% tax bracket.

I could be wrong but I think it only effects people who earn near the higher rate tax and above

2boys you are correct we are accidental btl when we met we owned a property each one of which we now let. We have now paid off both mortgages, we work our arses off we haven't inherited anything but we've always worked for ourselves and both our private pensions are worthless the rental is our very small pension. So far the changes don't affect us, we don't get mortgage interest relief as we don't have a mortgage we don't pay 40% tax as we don't earn enough. The stamp duty meant we offered less on the new property so we aren't even paying that much of that really and prices are shifting down. Seems to me so far the government got this right. Paying business rates would be a bit painful but my husband already pays those on his small commercial property so we would manage. I do think though be careful what you wish for I remember when house prices crashed last time and people really suffered it won't be pretty.

Property as investment and buy to let is helping fuelling the ridiculous property prices

So I am hardly going to make any profit (I have never made over £150 a month but it was something) but the mortgage is being paid and the price will rise hopefully

I could sell it and put the money away but I choose to take a gamble and hope the money increases.

It is not a given that it will and many people believe it is

Property as an investment has only taken off because private pension funds were savaged once state sector pensions and private pensions level off hopefully btl investments will too. We have no choice but to invest in property my dh is very handy but can't work full time due to injury same for me so we both work part time and run properties. The alternative is spend til it's gone then benefits and poverty in our old age it's not rocket science the more the government interferes the more repercussions there are.

But it's a gamble still

Any investments will be taken into account when benefits are considered

www.thedailymash.co.uk/news/society/britain-rallying-round-buy-to-let-landlords-20160401107696

Government policy going forward is to force out landlords of the type with huge debt that would remortgage it and then put down that untaxed equity on another btl property.

The BoE this week have made that scenario impossible for the highly leveraged from June onwards.

Yes HMRC are responsible for taxes, however BoE this week have said that lenders will have to take all outgoings including future tax due. Some btl will be able to continue to rent out due to covering costs from other earned income.
Those whose modus is to remortgage to release equity, won't be able to do so as they won't meet affordability criteria later this year.

Most won't know this currently, however with dc home for Easter and house full of economics and politics mates coming and going - I'm well aware of how those that understand the detail are happy it will result in the disappearance of the highly leveraged btl gambling on house prices over next couple of years.

Not only will loan be at a minimum of 125 per cent, the calculation should take into account all costs of buy-to-let, including estimated voids, council tax, repairs, letting-agents fees and utility costs.”

they will also take into account the tax changes starting from April 2017, as it would be silly to grant a mortgage not taking into account those coming changes, obviously. They deduct it from what will be lent to the btl.

For instance quoting from a landlord posting that does actually understand the implications - ""property with £1,000pcm gross rent would support at mortgage of about £175,000 at 5.5% 125 ICR
Deducting 10% agent fees, 10% maintenance, 20% extra tax due to Clause 24 only supports a mortgage of £111,000 at 5.5% 125 ICR; maintance charges on leasehold properties could make the position even worse. Finding properties worth around £150,000 that rent for £1,000pcm isn’t easy in the South East......"

Too difficult for some to understand so they will carry on until the tax man comes for them - the rent received will be added to income and lots will find they will be considered higher rate tax payers from 2017.

Posted on another thread info about looking for the reductions going on at bottom of market in London ie £500,000. How to use property bee etc if search my posts on that thread.

Buyer beware and see btl trying to sell off in last few months with reductions currently of £50,000 etc. I suggest property bee if anyone wants to have a look at the posts on other thread and see how it pays to know how much the reductions are.

Before BoE action earlier this week (ie before it was an even worse idea than now) this article in financial times states huge amount of btl to come up for sale this year and hardly any other new btl coming to table.

If a highly leveraged btl was daft enough to want to, then the BoE announcement this week has prevented them effectively buying at bubble prices.

"The National Landlords Association says one way for people to make money out of property is to sell, and has projected 500,000 properties from the private rented sector could go in 2016.

This could be followed by about 100,000 properties a year after the initial 500,000, significantly shrinking the private rental sector.
This could as Lee Travis, head of professional development at the Society for Mortgage Professionals, suggests, have the effect of “cooling the housing market by making buyers, not sellers, the price drivers”.

www.ftadviser.com/2016/03/24/training/adviser-guides/buy-to-let-market-is-already-adapting-to-changes-dvKOUDi24p1Jh6XssFITzK/article.html

Disclaimer: yes I know unencumbered landlords and heavily indebted btl are different species. No they're not evil, stupid probably to gamble with cheap money and take first time properties off the young to pay their interest only loans for them.

Would they borrow to speculate on stock exchange? Would they expect tax relief to do so on that money borrowed from the bank?

poor sods have been stitched up
it was a honey trap all along