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Budget Targets Landlords

Budget Targets Landlords

Was The Budget Really That Much Of A Surprise?

The first Conservative budget for 20 years was expected to be good for Britain; however, the reality was not what many landlords wanted to hear.

The decision to target private rental sector landlords and property investors wasn’t too much of a surprise, as the Government can plainly see where the profits are being made and they, like all the rest of the political parties, want a slice.

On the run up to the general election in May 2015 every other political party openly stated that they intended to target landlords, whilst the conservatives remained quiet, prompting a few political commentators to predict that policies would be introduced surreptitiously that would effectively put money into Government coffers.

That’s exactly what we got last week!

The key points that affect landlords from George Osborne’s budget statement include:

Benefit Cap Lowered To £20,000 (GBP)

The total amount of benefits a family can receive over the course of a year has been reduced from £26,000 (GBP) to £20,000 (GBP) – (£23,000 in London).

This is a particular concern for landlords as any loss of income from the reduced benefit cap will hit tenants’ housing benefit first.

Many private rental sector landlords are now worried about increased rent arrears and the probability that many areas of the UK will become unaffordable for large families to live in.

The Government have said that they will allocate £800 Million (GBP) of discretionary housing payments for councils to help affected tenants.

Housing Benefit Abolished For Under-21s

From April 2017 the automatic entitlement to housing benefit for 18- to 21-year-olds will be scrapped for new claimants.

Exceptions will be made for vulnerable young people, including those unable to return to their family home and claimants who were in work for six months prior to making a claim.

Working-Age Benefits Frozen For Four Years

The freeze means Local Housing Allowance (LHA) will fall further behind inflation as the chancellor seeks to stop the housing benefit bill soaring with increasing rents.

Buy To Let Landlord Mortgage Relief Cut

In a £2bn tax bombshell, from April 2017 landlords will no longer be able to claim tax reliefs worth 40% or 45% of the interest payments on their buy-to-let mortgages. Instead, the maximum tax relief will be set at 20%, although the change will be introduced over a four-year period.

Effectively it looks as though 40%/45% taxpayers will only get around half of their mortgage interest (and arrangement fees) offset against their rental income.

20% taxpayers shouldn’t see much change as all mortgage relief will be limited to the basic rate of income tax.

The effect of this will be staged meaning that

  • 25% of this extra tax will be payable on profits made in the April 2017 – April 2018 tax year,
  • 50% in April 2018 – April 2019,
  • 75% in April 2019 – April 2020
  • 100% in April 2020 – April 2021 meaning that the full effect of this change won’t be felt until the January 2022 personal tax bill is due.

Despite the staged introduction many PRS landlords have warned that this could see costs passed on to tenants in the form of higher rents.

Wear And Tear Allowance Tightened

Landlords will have to prove they have improved or maintained their rental property before they can deduct the costs from their taxed profits.

Currently, landlords can deduct 10% of the rent from their profits to account for wear and tear regardless of whether they have improved the property or not.

From April 2016 this is set to be replaced by a new system that only allows landlords to get tax relief when they replace furnishings.

Changes To Non-Domicile Rules

This change in entitlement could affect property investment and buy to let, particularly in London as people born in the UK to parents domiciled here will not be able to inherit non-dom status and people will not be able to have permanent non-dom status.

Anyone resident in the UK for 15 of the last 20 years will have to pay full UK tax.

Rent A Room Tax Free Income Threshold Raised

After 18 years, the Rent A Room tax free income threshold is being raised to £7,000 (GBP) per year. There are an estimated 19 million empty bedrooms in owner-occupied properties in England alone. Freeing up just 5% of those rooms would accommodate 1 million people. This move will also fuel the growth in short, informal lets such as the type offered by Airbnb and the like.

The tax reliefs that have been cut by Mr Osborne were hugely important for landlords in being able to offset other astronomic property costs such as lettings agent fees, landlord insurance, maintenance and repairs costs, as well as council tax.

It is still early days and we need to see how HMRC will implement some of these changes, because they may also try to find additional ways to stop property investors and landlords from profiting from property, however, there are ways to get around some of the changes introduced, including:

Tax Relief

Limited (Ltd) companies appear to be excluded from the mortgage relief cuts meaning that property investors and landlords could potentially look to purchase their future investment properties through Ltd companies.

Buy To Let mortgage lenders could become more open to this method of purchasing properties similar to the way that commercial lenders already facilitate.

Landlords who already own properties personally or in a Limited Liability Partnership (LLP) may want to transfer them to a Limited (Ltd) company; however, they will be subject to capital gains tax and stamp duty.

An alternative method to transfer property ownership whilst retaining the current mortgage would be by using a deed of trust, which would transfer the beneficial ownership to a Ltd company. A good solicitor can draw one of these up for you.

Property investors and landlords could also switch their focus slightly and purchase more properties that need refurbishments.

As long as the property is in a habitable condition when purchased but still needs redecoration and comes into the lettings market before the refurb is done, most repairs such as kitchens, bathrooms, paint etc can be offset against all property income from a whole rental portfolio.

Bird_OldLadyWe will always try to keep our sector alive and rents affordable as we are providing services to people who need them, we don’t set out to rip people off, we’re not politicians, we are the ones who take the financial risks, we’re the people who provide housing and it’s our name on the deeds not yours.

You see Mr Osborne, whilst you may think that you are being clever and are tapping in to wealth generated by other people’s hard work and risk taking, well, we as landlords won’t be beaten!

Looking For A Buy To Let Mortgage?

Quarter Of Potential Property Investors Don’t Know How To Apply For Buy To Let Mortgages

New Research Discovers That Quarter Of Potential Property Investors Don’t Even Know How To Apply For Buy To Let Mortgages

New research by a specialist mortgage lender has discovered that an amazing 28% of would-be property investors don’t know how to apply for a buy to let mortgage in order to finance their property purchases.

The figures show that 1 in 4 potential property investors considering investing in property to boost their retirement income don’t know how to apply for a buy-to-let mortgage to get started on their property investment journey.

The research, conducted by specialist mortgage lender Kensington, also found that 54% of people approaching retirement age would consider investing in property using buy-to-let mortgages in order to help increase their income in retirement, but many didn’t know what they needed to do or what evidence to provide in order to apply for the correct type of mortgage.

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Moving Abroad? – Things To Know Before You Go

Moving Abroad? – Things To Know Before You Go

British Citizens Warned To Plan For

The Unexpected When Moving Abroad!

The Foreign and Commonwealth Office (FCO) has issued a checklist for British citizens planning to purchase property, retiring or moving abroad.

Buying property overseas can transform the lives of many property investors, but buyers are warned to take independent advice before completing any overseas property purchases and moving abroad.

FCO staff last year helped a number of British expatriates with a variety of issues, with many people facing heavy fines, financial ruin or finding themselves on the wrong side of the law because they were not fully prepared.

These cases involved issues such as property disputes, bankruptcy caused by changes in personal circumstances, pension complications and unexpected health issues.

A recent FCO report also suggests that high hospitalisation and death rates occur in areas where large numbers of elderly British nationals reside, notably in Europe and South East Asia.

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A Life Less Taxing For Landlords

A Life Less Taxing For Landlords

HMRC Issue Landlord Warning

With the new tax year already here the HMRC have repeated the warning that they are cracking down on tax evasion by UK private rented sector landlords,

All PRS landlords who own residential rental properties are being advised to register for self assessment, if they haven’t done so already.

The self assessment annual tax return covers the period up to the 5th April each year, and needs to be filed online by no later than the following 31st January.

In order to calculate the tax owed by a landlord, the rental income must be added to any other taxable income that the landlord may earn, including wages from employment. The rate of income tax that HMRC will charge will depend on the landlord’s total income for the tax year.

There are a number of expenses that landlords can offset against their tax liability for rental income, including;

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Banned Property Report

We have just read a property report that was previously banned about 4 months ago because it revealed inside knowledge that other property experts didn’t want made public.

Get The Property Report The Experts Dont Want You To Have

Get The Property Report The Experts Dont Want You To Have

The property report was meant for a group of private VIP property investors but I’ve been forwarded one of their private emails and having read the explosive content contained in the report I thought it should be shared with our readers, so now you can access it too (while it’s still live):

Download “The State of The Property Market Report & Predictions For 2013” PDF report

This report details the previously unspoken risks and opportunities that savvy property investors face in the property market right NOW

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This is meant to be private, but it’s the start of a new year, and we exist to help property investors find the resources they need to profit from property, so let’s not waste time!

Register for YOUR Unfair advantage NOW!

The Top 7 Property Predictions for 2013 – Exposed -Register for YOUR Unfair advantage NOW!

Here at MyPropertyPowerTeam, we want YOU to start 2013 fully armed, so you can smash those property investment resolutions and show the world that you have the knowledge to succeed as a successful property investor. 

So its time to gain a really unfair advantage!..

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There Will Never Be A Better Time To Invest In Property

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