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Death of buy-to-let: landlords wake up to Osborne's 150pc tax

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    #11
    Originally posted by MarillionFan View Post
    I've yet to see or do a calculator on it. Anyone got or seen one?
    Depends on which Property group you're a member of, but there are a few spreadsheets going around that do the calcs for you. If most of the BTL income is in your wife's name and that is her only income, then hopefully you won't be affected too much by the budget changes. We have been impacted, even though the wife doesn't work, but it means ultimately that I won't be able to issue dividends from the contracting business without pushing us both into the 40% bracket.

    In fact, the chancellor's poor judgement on BTL means that it'll be better for me to quit contracting, pay down the BTLs and live off the rental income. By 'better' I mean overall - in terms of time/stress etc even though clearly our income will be less, as will the tax we pay (well done, George).

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      #12
      Originally posted by ChimpMaster View Post
      Depends on which Property group you're a member of, but there are a few spreadsheets going around that do the calcs for you. If most of the BTL income is in your wife's name and that is her only income, then hopefully you won't be affected too much by the budget changes. We have been impacted, even though the wife doesn't work, but it means ultimately that I won't be able to issue dividends from the contracting business without pushing us both into the 40% bracket.

      In fact, the chancellor's poor judgement on BTL means that it'll be better for me to quit contracting, pay down the BTLs and live off the rental income. By 'better' I mean overall - in terms of time/stress etc even though clearly our income will be less, as will the tax we pay (well done, George).
      Well yes, because my wife doesn't have a salary it's less, but I wanted to pay her through a new shop so going forward I need to understand it a bit more
      What happens in General, stays in General.
      You know what they say about assumptions!

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        #13
        Originally posted by ChimpMaster View Post
        In fact, the chancellor's poor judgement on BTL means that it'll be better for me to quit contracting, pay down the BTLs and live off the rental income. By 'better' I mean overall - in terms of time/stress etc even though clearly our income will be less, as will the tax we pay (well done, George).
        Same here. Without this change, I'd most likely have bought another 1-2 properties and worked to pay them off over the next 5-10 years. Now I may not pursue that and instead pay off my last B2L that has a mortgage on it and then generally wind down to an earlier "retirement" - a.k.a. only working when I want, even if that is a stacking shelves at the supermarket... Overall tax take will be reduced.

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          #14
          Originally posted by Crossroads View Post
          Same here. Without this change, I'd most likely have bought another 1-2 properties and worked to pay them off over the next 5-10 years. Now I may not pursue that and instead pay off my last B2L that has a mortgage on it and then generally wind down to an earlier "retirement" - a.k.a. only working when I want, even if that is a stacking shelves at the supermarket... Overall tax take will be reduced.
          Property investment models will change to adapt to the new tax regime. Bigger investors are already talking about selling some of their portfolio to pay down their debt, and then use their rental profit to buy properties in cash when sufficient funds have been accumulated. This implies a slower, more considered growth plan rather than one where the investor would simply maximise their debt by releasing equity to fund purchases. So, buying 1 or 2 houses a year rather than 10, for example, where that investor has a big enough portfolio (probably talking cheap houses up North).

          I've never been a fan of the high debt model anyway - the ones that the BTL courses teach these days - because I'm risk-averse on big investments like property, so I prefer to keep LTV reasonable; this is more old school I suppose, but it'll still make me money when house prices come down or when interest rates rise.

          George will succeed in 3 things:
          -reducing house price inflation - though not reducing prices, at my guess.
          -reducing take intake from BTL investors, due to a number of reasons I won't go into here.
          -alienating landlords/investors and losing them at the next election.

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            #15
            This will only apply to small-time landlords - as it only applies to house rentals as an individual.

            The bigger fish will have a Limited Company, which is exempt from these changes - as it is much, much harder to deny tax relief on LtdCo financing. The can of worms would be humongous.

            Although it is harder getting a BTL mortgage through a LtdCo - and you may end up paying a higher interest rate/fees, plus accountants to do the books etc.

            So you may still end up splashing the cash anyway - just many people feel happier giving the money to banks/accountants than to HMRC

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              #16
              Originally posted by eek View Post
              Possibly, possibly not. If prices fall too far those affected won't be able to sell. It does remove one large prop for house prices (no point over bidding on the BTL and spending most of the income on interest) though and I would love to know whether its intentional or not....
              IMHO, everything that Osborne does is intentional (whether it achieves the desired effect is another matter). He prodded the housing market back in 2013 with H2B, and that was premised on the notion that the UK housing market is a quick and demonstrated route to improving consumer confidence and internal demand. He expected a bubble to some degree. He didn't necessarily expect the full impacts of funding for lending and endless ZIRP and the bubble has perhaps got out of hand and risks the traditional UK housing market crash. At the same time, he's transparently trying to take over the middle ground of politics, borrowing any Labour ideas that he sees as having legs.

              Put in that context, I think the removal of some BTL tax breaks was inevitable. He's also been cracking down on the higher end of the housing market in prime central London through a whole range of measures (increased stamp duty, increased tax on shell structures, more transparency to avoid money laundering etc.). All of this has had a massive impact on prime central London, which has been in negative territory for some time, and this market will eventually impact other London markets and the rest of the south east. To a large extent, the bubble is focused in the south east. So, I think this policy achieves a bunch of different objectives at once, like most of Osborne's policies. Putting aside the Omnishambles, he's quite a clever bugger.

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                #17
                I got screwed by buying my house just before the h2b scheme and now I'm gonna get screwed when I pay it off and buy a 2nd property to rent out, whilst losing 7.5% of my income to dividend tax, T&S, and a general shakedown of the contract market

                Thx tories
                Unless you're the lead dog, the scenery never changes.

                Currently 10+ contracts available in your area

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                  #18
                  Originally posted by AtW View Post
                  " worst hit will be those modest, middle-class savers who have prudently chosen to invest in buy‑to‑let, often alongside pensions and Isas, as a means to supplement their income. "
                  Nothing wrong with Buy To Let ... investing one's own cash which has come from (hopefully) productive work, but Borrow to Let is another thing. So are these people 'investors' or 'businesses' anyway? - they seem to claim either one or the other depending on what suits them best at any particular time. If they are investors then can I also have some tax relief to borrow and invest in some more gold please? Thought not. If they are businesses then are they not 'trading while insolvent' if they cannot even adjust to a gradual reduction of existing (and very generous) tax reliefs on their debts? - in which case they need to be put out of action asap.

                  No, they are just speculating with cheap credit and pricing out potential owner occupiers in the process. No sympathy at all.

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                    #19
                    Originally posted by MarillionFan View Post
                    They're in the wife's name and is her only source of income. Tax Impact is minimal.


                    Your stupidity never fails to impress me.

                    On his wife's name, it seems

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                      #20
                      Originally posted by Stevie Wonder Boy
                      You voting Tory next time round then?
                      If they bin the triple lock, rape the banking sector, and tax wealthy boomers to balance years of unhindered wealth accumulation, sure I'd vote Tory.

                      http://www.cih.org/news-article/disp...housing_market

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