How does Buy to Let END!

[XswampyX]

1 minute ago, One percent said:

If you read the article posted by @spygirl above, it seems that rental income is already taxed at 40 percent. I might be misunderstanding it though.  

Possibly... 

It's not that it's taxed at 40% only that people pay tax at 40% when they earn £50,000

Quote

What is the 40% tax bracket?
The 40% tax bracket is also known as the higher rate tax band and, if your income is within the boundaries of that tax band, you are liable to pay 40% tax on any earnings that are over the threshold.

In the 2023/2024 tax year the higher rate 40% tax threshold starts at £50,271 and stops at £125,140.

This means any earnings you have over the threshold of £50,271 is taxed at 40% up to the  £125,140 limit.

Read our short tax guide for 40% tax payers to find out how much income tax you will be paying and if you can claim tax relief at 40% to reduce your tax bill.

Boo hoo! 

They (the landlord) used to be able to offset their mortgage costs against the rent they collected.

You (actually your tenants) paid £45,000 in interest only, you collected £50,000 in rent and paid tax on the difference £5,000. 40% of £5,000. 

Now the whole £50,000 is added to your income... and you pay tax based on that. Pushing loads of them into the higher tax bracket.

Now it sounds bad for landlords... but we don't get to offset our interest payments against taxable income, then why should they?

Specially if everybody is trying to buy the same houses.

 

 

[spygirl]

18 minutes ago, One percent said:

If you read the article posted by @spygirl above, it seems that rental income is already taxed at 40 percent. I might be misunderstanding it though.  

It's taxed at your income tax rate.

This is why s24 is such a bastard.

Your 1k/m rent, 900/m mortgage , 100m 'profit' suddenly becomes  1k/m rent, 300m tax, 900m mortgage 200m loss.

So you raise rent. And pay more tax.

Again, if you'd sat down with excel or an accountant you'd be able to see it 6 years ago.

Then, IR shoot ip just as s24 comes in full.

 

[Wight Flight]

16 minutes ago, spygirl said:

It's taxed at your income tax rate.

This is why s24 is such a bastard.

Your 1k/m rent, 900/m mortgage , 100m 'profit' suddenly becomes  1k/m rent, 300m tax, 900m mortgage 200m loss.

So you raise rent. And pay more tax.

Again, if you'd sat down with excel or an accountant you'd be able to see it 6 years ago.

Then, IR shoot ip just as s24 comes in full.

 

To put it another way.

Take your bog standard portfolio landlord with four properties bringing in £60k rent but because of rising interest costs now makes zero profit but still gets a tax bill as if he had.

So he needs to get a job. Every penny he earns will be taxed at the higher rate. No nil or lower rate band for him.

And he has also lost his child benefit.

And, i guess very soon, his wife and Range Rover.

Edited September 17, 2023 by Wight Flight

[One percent]

Just now, Wight Flight said:

To put it another way.

Take your bog standard portfolio landlord with four properties bringing in £60k rent but because of rising interest costs now makes zero profit.

So he needs to get a job. Every penny he earns will be taxed at the higher rate. No nil or lower rate band for him.

And he has also lost his child benefit.

And, i guess very soon, his wife and Range Rover.

Bloody hell, you would have to be mad to leave yourself exposed to that. 

[Wight Flight]

1 minute ago, One percent said:

Bloody hell, you would have to be mad to leave yourself exposed to that. 

Divorce to protect assets and then bankruptcy is probably the best escape plan they have now.

[spygirl]

1 minute ago, One percent said:

Bloody hell, you would have to be mad to leave yourself exposed to that. 

This is it.

The leverage with io btl - and 95%+ of LL since 1999 are IO - is nuts.

That's been my case on here n Tos.

It's only zirp that bailed these fuckwits out.

 

 

[Bobthebuilder]

1 minute ago, One percent said:

Bloody hell, you would have to be mad to leave yourself exposed to that. 

Landlords are selling up en masse at the moment, you dont see it in the MSM or even on these forums yet, but its huge. I deal with landlords in my business, and have lost approx 30% of my regulars in the last 12 months.

[One percent]

1 minute ago, Wight Flight said:

Divorce to protect assets and then bankruptcy is probably the best escape plan they have now.

I would imagine that an awful lot of properties will be hitting the market soon. 

[One percent]

Just now, Bobthebuilder said:

Landlords are selling up en masse at the moment, you dont see it in the MSM or even on these forums yet, but its huge. I deal with landlords in my business, and have lost approx 30% of my regulars in the last 12 months.

Do you know who they are selling to?  Other landlords or back to actual homeowners?  

[Wight Flight]

1 minute ago, One percent said:

I would imagine that an awful lot of properties will be hitting the market soon. 

Not necessarily.

This only applies to the loonies that went balls deep in extracting every penny of equity to reinvest.

The ones that clapped like seals at landlording conferences.

There are a few of them, but there are even more with just one low leveraged place who will sit it out.

[Bobthebuilder]

2 minutes ago, One percent said:

Do you know who they are selling to?  Other landlords or back to actual homeowners?  

Not sure, but I think homeowners, as the majority are Victorian and the impossibility of meeting the new energy performance certificates for BTL is the main reason for selling.

[Wight Flight]

3 minutes ago, One percent said:

Do you know who they are selling to?  Other landlords or back to actual homeowners?  

In the main not other landlords here hence the rental crisis.

Lots of shifting sands.

[Wight Flight]

It is all odd.

It looks like over the last couple of years the btl lot have looked enviously over the fence at the fhl bunch and switched to that.

The fhl bunch are trying six months winter lets as the season doesn't pay enough because there is too much competition.

And the second home owners are feeling the pinch and also trying winter lets to ease the burden.

Of course none of this works, and the smart ones have already sold. The question is will there be anyone that can raise a mortgage left when the latecomers try to follow them to the exit.

It surprises me how attached people get to a house they have never lived in. Or perhaps they just like the feeling of owning multiple properties.

[Bobthebuilder]

12 minutes ago, One percent said:

I would imagine that an awful lot of properties will be hitting the market soon. 

Do you not keep up with this thread dear?

@No One has been posting a fantastic chart on listed properties, it has almost gone exponential in the last year.

[eek]

9 minutes ago, Bobthebuilder said:

Not sure, but I think homeowners, as the majority are Victorian and the impossibility of meeting the new energy performance certificates for BTL is the main reason for selling.

Surely it’s not impossible, it’s just requires spending a few grand.

 

of course they don’t have a few grand to spare and with interest rates now at 6% rather than 2%….

[Bobthebuilder]

1 minute ago, eek said:

Surely it’s not impossible, it’s just requires spending a few grand.

 

of course they don’t have a few grand to spare and with interest rates now at 6% rather than 2%….

Try putting cavity wall insulation into a house without a cavity wall, or loft insulation into a flat with no attic access. Thats after you have fitted new doors, window's, new a rated boiler, full re wire, lcd lights, capped at £10K per new tenancy agreement.

[GTM]

4 hours ago, AWW said:

"the South" is quite big. Have you got some data to share? Because I don't think 4% is correct.

True enough, lazy use of language on my part. I use the South as shorthand for that area of the South that you are never quite sure will be under the South East or South West on regional drop downs. The sort of Southampton, Portsmouth, Winchester triangle. Most of the places I've been looking at (larger family houses, large bungalows) have been coming in at 4% +/- 0.5%. As an example the place I left in March was on a yield of 3.9% based on the rent I was paying and what they initially asked when they put it up for sale. Though since they have reduced the price a couple of times with nobody biting I guess you could argue the yield is higher. The place I moved into is on a yield of 4.5% based on the price the landlord paid for it in 2019. A similar place about a 1/4 mile away came on recently at the same rent I'm paying and the asking rent has been heavily reduced, so I probably overpaid a bit.

[Wight Flight]

3 minutes ago, Bobthebuilder said:

£10K per new tenancy agreement.

I didn't know that.

They really won't want to lose a tenant at that price.

[Guest]

On 16/09/2023 at 09:16, spygirl said:

Rents are set to rise by almost five times more than house prices between now and 2026, according to leading estate agent group, Hamptons.

What's 5 times a negative number?

[spygirl]

45 minutes ago, Wight Flight said:

It is all odd.

It looks like over the last couple of years the btl lot have looked enviously over the fence at the fhl bunch and switched to that.

The fhl bunch are trying six months winter lets as the season doesn't pay enough because there is too much competition.

And the second home owners are feeling the pinch and also trying winter lets to ease the burden.

Of course none of this works, and the smart ones have already sold. The question is will there be anyone that can raise a mortgage left when the latecomers try to follow them to the exit.

It surprises me how attached people get to a house they have never lived in. Or perhaps they just like the feeling of owning multiple properties.

I've been thru 2 fhl downturns -

1980, when loads of holiday houses suddenly went zap and changed to low cost rentals

And 90-94 when the owner went bust and the place was bought by a oo.

Same problem as io btl- leverage.but worse as not only do IR costs go up but you find bookings (income) goes down too.

1980s slowdown, which I barely grasped, as I was 9/10 and suddenly found loads of scratters getting on the school bus after suddenly moving from  ?, fhl were owned outright.

90s one was when lots of banks had lent some money. Buy a holiday cottage in 88, take 50% hit in 93.

Bank n borrowers got hammered by that.

This time very few banks (Cumberland n Leeds bs) have lent a *lot* of money.

When these go bad, and they will, fhl are fucked.

 

 

 

[One percent]

9 minutes ago, Darude said:

What's 5 times a negative number?

Fucked. 

[Chewing Grass]

4 minutes ago, spygirl said:

1980s slowdown, which I barely grasped, as I was 9/10 and suddenly found loads of scratters getting on the school bus after suddenly moving from  ?, fhl were owned outright.

Rhyl, destroyed by Scouse and Manc lifestyle bennie claimants.

We had family scrattersfrom Coventry that decided that Brixham was the place to be and got a nice 4-Bed Semi.

[Wight Flight]

1 hour ago, Bobthebuilder said:

Try putting cavity wall insulation into a house without a cavity wall, or loft insulation into a flat with no attic access. Thats after you have fitted new doors, window's, new a rated boiler, full re wire, lcd lights, capped at £10K per new tenancy agreement.

Are you sure it is per tenancy agreement?

I can't find that, but i can't find any timescale either suggesting it is a one off effort.

[Bobthebuilder]

3 minutes ago, Wight Flight said:

Are you sure it is per tenancy agreement?

I can't find that, but i can't find any timescale either suggesting it is a one off effort.

Thats the last thing I read through a licensed trade publication.

[Wight Flight]

7 minutes ago, Bobthebuilder said:

Thats the last thing I read through a licensed trade publication.

Interesting.

Lots of scope for dodgy builders bills though!

In your experience how many places are C or better at the moment?

Edited September 17, 2023 by Wight Flight