lauralivesartnouveau Posted June 23, 2007 Report Share Posted June 23, 2007 Hi This will affect us all They are talking about removing mortgage interest tax relief now Link below http://news.bbc.co.uk/1/hi/programmes/moneybox/6233266.stm Oliver Link to comment Share on other sites More sharing options...
plym77 Posted June 23, 2007 Report Share Posted June 23, 2007 this is the opinion of someone on the side of the first time buyer and not based on anything that has been released by the government. I am a Chartered Tax Adviser and I have not heard anything 'on the grapevine' about this. It would make no sense. A business would get relief for a business related loan and the way in which property businesses are now based (more like normal trade with regard to many aspects (capital injection etc)- rather than the old schedule A of old) I cannot see how this can happen. Gordon Brown is unlikely to bring something like this in (either as Chancellor or Prime Minister) since a large part of the strength of the UK economy is based on property. Whilst I would say 'never say never' I would not see this as a threat - bigger threats are interest rises! I certainly wouldn't worry about this for a while - even if it was something that would be considered I believe that we would be told years in advance of it happening. Sherena Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted June 23, 2007 Author Report Share Posted June 23, 2007 Hi Sherena Thank you for your reply Gordon Brown has a history of retrospective and sudden tax changes as per airport tax introduced earlier last year. If this did occur would it be possible to incorporate into a business in order to continue to claim mortgage interest tax relief. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted June 24, 2007 Report Share Posted June 24, 2007 Dont see how this could even be feasible as there only a handful of LL who could operate on that basis - If they do this they will presumably also remove capital gains tax from the profits ! But ....nothing would surpise me at the moment ...moving the goalposts is one thing............ destroying the pitch is a completely diffferent matter ............... Simon Link to comment Share on other sites More sharing options...
Melboy Posted June 24, 2007 Report Share Posted June 24, 2007 I for one believe that tax relief may be removed from BTL mortgages. This tax relief removal is nothing new and has been mooted around by successive Governments for years and years. The Council Tax has been upgraded to 100% from 50% on second homes and I see no reason why this Government would not apply similar principles to anyone owning a second home be it a BTL or for personal use with holiday letting arrangements. Mel. Link to comment Share on other sites More sharing options...
lauralivesartnouveau Posted June 24, 2007 Author Report Share Posted June 24, 2007 Hi all The ground has been prepared for this! Gordon has introduced REIT ready for the large equity houses to build portfolios quickly with extensive cash reserves. There is no love in society for the small or amateur landlord in fact I read a report that landlords have got rich quick on the backs of poor tenants. This government wants to be seen to redistribute wealth and this is a mechanism to achieve this and bring in extra revenue at the stroke of a pen. The result will be a collapse in lower end property values benefiting in the short term first time buyers. The small B2L investor will sell up and the larger ones may find mechanisms such as incorporation to continue investment. Simons right though that the financial industry will be hit very hard as B2L repossessions take hold. Oliver Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted June 24, 2007 Report Share Posted June 24, 2007 "Moving the goalposts" is one thing "nicking the pitch" is another....................... Damage limitation "planning" is the order of the day here ...This has not changed my views on purchasing more prop -just focussed my thoughts on exactlty which type of prop to carry on investing in .........(one's i feel with develoment potential more than anything else, i think is the only way to combat this situation ...and perhaps a "correction" to the content of my portfolio to accomodate trend we ahve upon us...... Simon Link to comment Share on other sites More sharing options...
plym77 Posted June 25, 2007 Report Share Posted June 25, 2007 This seems to have a few varying opinions! I still do not think that this is on the cards for a while yet. With a new PM and only 2 years until the next election where I think that bringing in something like this could be suicidal. And even if they do bring it in I do not think it would be retropective. In answer to your question Oliver, if they do take tax relief away for mortgage relief under a property business, they would almost certainly do the same for whichever way you operate the business - including a limited company. Even if for some reason they did leave it intact for a Limited Company property business, you would need to get your properties into the business which will cause an aggregate Stamp Duty Land Tax Charge over all properties (so if you had 5 properties at £100k each you couldn't simply say each is below the threshold - it would be £500k at 4%), and additionally, on sale of any of the properties they would only attract indexation as company assets, not taper relief or annual exemption - which is what you would get personally on a sale, and which is much more generous than indexation. Owning BTL properties directly through a company is usually a bad idea. However for 'portfolio kings/queens' sometimes a more complicated structure involving a corporate partnership can be the way forward - this is cheaper to put into place for someone starting out and building a portfolio than for someone wanting to introduce a number of properties they already own. If structured correctly you can get some favourable tax results. Sherena Link to comment Share on other sites More sharing options...
J4L Posted June 25, 2007 Report Share Posted June 25, 2007 apologies for hijacking the original post here but Sherena I have a question for you. Is it better then for me to have my new house (a BTL) bought personally rather than through the agency then and then charge the agency to manage it? Link to comment Share on other sites More sharing options...
plym77 Posted June 25, 2007 Report Share Posted June 25, 2007 Ordinarily the answer is buy it personally (either on your own or with others) - I do not know whether you are a Limited Company or not, but broadly: Limited Company purchases of BTLs - as mentioned above, on sale the reliefs and allowances are not as favourable and would usually far outweigh any beneficial tax rate provided for a limited company. If you are a limited company there is however merit in charging a management fee to syphon off some of the profits that may be payable at higher rate personally, compared with the company tax rate which as a new business I would expect you are in the small company rates of 20% (pre-tax profits of £300k). If you are unincorporated - still buy it personally but also there would probably be no merit in charging a management fee to the schedule A business - A BTL business pays tax but not national insurance and as an unincorporated you cannot shelter Higher Rate Tax (which to a certain degree is possible as a Limited). If you charge say £1000 to the BTL for management, then you would be paying an additional national insurance charge of either 8% or 1% depending on profit levels. Hope this helps Sherena Link to comment Share on other sites More sharing options...
plym77 Posted June 25, 2007 Report Share Posted June 25, 2007 Ordinarily the answer is buy it personally (either on your own or with others) - I do not know whether you are a Limited Company or not, but broadly: Limited Company purchases of BTLs - as mentioned above, on sale the reliefs and allowances are not as favourable and would usually far outweigh any beneficial tax rate provided for a limited company. If you are a limited company there is however merit in charging a management fee to syphon off some of the profits that may be payable at higher rate personally, compared with the company tax rate which as a new business I would expect you are in the small company rates of 20% (pre-tax profits of £300k). If you are unincorporated - still buy it personally but also there would probably be no merit in charging a management fee to the schedule A business - A BTL business pays tax but not national insurance and as an unincorporated you cannot shelter Higher Rate Tax (which to a certain degree is possible as a Limited). If you charge say £1000 to the BTL for management, then you would be paying an additional national insurance charge of either 8% or 1% depending on profit levels. Hope this helps Sherena Link to comment Share on other sites More sharing options...
plym77 Posted June 25, 2007 Report Share Posted June 25, 2007 Ordinarily the answer is buy it personally (either on your own or with others) - I do not know whether you are a Limited Company or not, but broadly: Limited Company purchases of BTLs - as mentioned above, on sale the reliefs and allowances are not as favourable and would usually far outweigh any beneficial tax rate provided for a limited company. If you are a limited company there is however merit in charging a management fee to syphon off some of the profits that may be payable at higher rate personally, compared with the company tax rate which as a new business I would expect you are in the small company rates of 20% (pre-tax profits of £300k). If you are unincorporated - still buy it personally but also there would probably be no merit in charging a management fee to the schedule A business - A BTL business pays tax but not national insurance and as an unincorporated you cannot shelter Higher Rate Tax (which to a certain degree is possible as a Limited). If you charge say £1000 to the BTL for management, then you would be paying an additional national insurance charge of either 8% or 1% depending on profit levels. Hope this helps Sherena Link to comment Share on other sites More sharing options...
plym77 Posted June 25, 2007 Report Share Posted June 25, 2007 sorry! don't know why that posted so many times! Sherena Link to comment Share on other sites More sharing options...
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